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NOK on Top as Markets Rush to Price in Tighter Policy

FOREX
  • Unexpected stickiness of core inflation has propped up the NOK to top the G10 table in early Friday trade. CPI-ATE went against forecast, rising to 6.7% vs. Exp. 6.3% on accelerating food price inflation. The subsequent NOK rally accompanied a tightening of rate expectations via NOK FRAs, which are now pricing the tightest monetary policy in Norway of this cycle so far.
  • The NOK rally has tipped EUR/NOK through the 50-dma support for the first time since Q4 last year, which could represent a meaningful momentum shift for the currency over the medium-term. Focus turns to the June 22nd rate decision and MPR, where an upward revision for rate path expectations now looks inevitable.
  • JPY sits at the other end of the G10 table, helping USD/JPY rally back above 139.50 having endured losses across Thursday trade. The moves follow a Bloomberg report citing sources that the BoJ see little requirement for a tweak in yield curve control at this juncture.
  • The Canadian jobs report takes focus going forward, with markets looking for net change in employment of 21.3k, and an uptick in the unemployment rate to 5.1%. The Fed remain in their pre-meeting media blackout, meaning speeches from ECB's de Cos and Centeno will be watched by markets.
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