NORWAY: Solid Activity /Employment Signals From Q2 RNS; NB In No Rush To Cut
Norges Bank's Q2 Regional Network Survey has been released - the last major input ahead of the June 19 decision. A first glance at the survey does not suggest Norges Bank should be in a rush to cut rates - certainly not at next week's decision (in line with consensus and market pricing).
- Activity and employment signals appear positive, there are limited changes in capacity utilisation, and wage growth expectations were revised up a touch.
- Recent growth data has pointed to an economy that is coping relatively well with rates at 4.50%. This survey underscores that view.
- However, guidance that "the policy rate will most likely be reduced in the course of 2025" remains intact. Spot inflation has been weaker than Norges Bank expected in March, so that should leave room for one or two cuts in H2 2025.
Highlights:
- "Regional Network contacts expect growth to remain firm in 2025 Q2 and Q3. International trade barriers are increasing uncertainty, but only a few contacts expect that this will lead to lower growth in the period to autumn. Increased defence investment and higher aquaculture output are boosting growth."
- "Contacts expect lower investment in 2025 than in 2024 and fairly stable investment in 2026."
- "In this survey, 35% of contacts report that they would not be able to boost activity without hiring or increasing production capacity in other ways. This percentage is unchanged since the previous survey. "
- "Contacts are planning to increase employment in both 2025 Q2 and Q3."
- "Contacts expect annual wage growth of 4.5 percent in 2025 and 4.0 percent in 2026. Overall, profitability among contacts has improved compared with one year ago."
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SEK: Early Strength Noted, Initial Support In EURSEK and NOKSEK Untested For Now
Some idiosyncratic SEK strength noted over the past ~45 minutes, with EURSEK extending to fresh session lows at typing - no obvious headline trigger noted. This week’s Swedish calendar is heaviest tomorrow, with the final April CPIF report due at 0700BST/0800CET (following the lower-than-expected flash print) and the Riksbank May meeting minutes at 0830BST (following the slight dovish guidance tilt in last week's policy statement).
- EURSEK is down 0.4% on the session at 10.8480. Initial support is the May 7 low at 10.8375, clearance of which would expose clustered support around 10.8000 (76.4% retrace of the April 3 – Apr 11 rally at 10.8005; April 4 low at 10.7941).
- Initial resistance is the 20-day EMA at 10.9442, which has contained upside in the cross the prior six sessions.
- NOKSEK is down 0.3% on the session, but support at the 20-day EMA (0.9311) and the trendline drawn from the April 9 low (0.9283 today) remains untested. Shallower pullbacks will be considered corrective.
SWAPS: German ASW Curve Twists, Eyes Supply & Broader Risk Backdrop
German ASWs vs. 3-month Euribor are +0.5bp to -0.5bp.
- The front end of the curve outperforms, despite the impending Schatz auction, probably owing to a steadier risk backdrop after Monday’s equity rally.
- Weakness in the long end of the outright German bond curve/curve steepening seems to play into moves further out the ASW term structure, the presence of long end supply out from the EU and Netherlands may be a factor here.
CROSS ASSET: Bond futures are extending lows
- New intraday lows for Govies on both sides of the Pond, we have some heavy early supply in Europe, and some Desks might also look to position ahead of the US CPI.
- Not much movement in the Dollar on the small move higher in Yields, on the contrary the Dollar is still in the red against most G10s, at least for Today.
- Immediate support in Bund is at 129.28.
- For the TYM5, the 4.50% 10yr Yield level is situated at 109.28.
