Norges Bank: High probability of a hawkish surprise – Danske Bank

Christin Tuxen, Chief Analyst at Danske Bank, suggests that the key event today is the Norges Bank meeting and they have long argued that the case for a 2018 hike was under-priced in rates markets, which was one of several arguments for starting the year with long NOK positions.

Key Quotes

“Over the last month we have seen a significant re-pricing of NB, which actually means our base case for today’s announcement is more or less in line with current market pricing. As a result, a rate path suggesting a 50% probability of a September hike should not drive a major NOK move upon announcement and we could well see the important 9.5262 support level hold for EUR/NOK. Importantly, we do see a high probability of a hawkish surprise – e.g. NB signalling a September hike whilst opening a door for June – in which case this support level would be broken, opening up for a test of the support levels in the mid-to-low 9.40s. We are short EUR/NOK and long NOK/SEK going into the meeting.”