Recent activity data in Norway, at least over the past 4-5 weeks, have disappointed and supported Norges Bank’sdovish policy stance, with Sep and Dec 2014 NOK FRA rates having been scaled down by around 20bps and resulted in NOK underperformance. It is primarily retail sales and unemployment that have been soft, while manufacturing output, the PMI, the trade balance and credit growth all having been largely stable, while the CPI of course in July and August came in wellabove both expectations and the NB’s previous projections. In other words, the macro backdrop is finely balanced, with the Bank currently taking the view that soft domestic demand, private consumption in particular, will prevail going forward, and that will be the key factor in reining in price pressures at the consumer level despite expectations for a sustained global recovery and a somewhat weaker exchange rate.
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Deutsche Bank