Nordics In Focus
The cautious tone in markets continued on Thursday, despite some supportive Australian jobs data overnight, which dragged some of the risk currencies higher initially. The euro started to drift lower again mid-way through the European morning but with limited news flow aside from some cautious Nowotny comments, other currencies stole the headlines. The Nordic currencies were the standout under-performers with soft CPI data in both countries and weak industrial production numbers in Sweden. The CPI prints are particularly concerning – the 1.3% y/y number in Sweden is the lowest level in 18 months, so the krona and Swedish rates markets came under pressure. Norwegian CPI was also soft ahead of today’s meeting but the market expects Norges bank to keep policy rate unchanged after the surprise cut in March. While the risk of a cut has increased we still think they remain on hold given the strength of the wider domestic economy though Governor Olsen will likely try and talk down the krone in any case. As expected the BoE left both the policy rate and asset purchase program unchanged and as such offered no statement. Sterling rallied slightly on the announcement though we see upside from this alone limited with long positioning slightly extended
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UBS Investment Bank