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NOK Surges as Norges Bank Pricing Bumped Higher on CPI

FOREX
  • The greenback again trades softer ahead of NY hours Wednesday, mimicking the price action seen on Tuesday, albeit within a more muted range. EUR/USD continues to hold just above the 1.02 handle, but is yet to make any meaningful test on the Tuesday European high of 1.0247. Among the crosses however, EUR is faring less well, with headlines this morning concerning the impassability of the Rhine river hampering supply chains further on the continent. EUR/NZD is testing the 1.62 handle in response.
  • Risk sentiment is generally improving, with both equities and high beta currencies on the front foot. The e-mini S&P has improved over the past hour so, erasing a modest Asia-Pac session drift to narrow in on 4155.00, the overnight Tuesday high. As a result, the likes of NZD and CAD are edging higher - although volumes and activity remain light at this stage.
  • NOK's strength so far Wednesday follows a bumper inflation print for July, coming in at 1.3% on the month vs. Exp. 0.9%. This has prompted a wide range of analysts to bring forward expectations for tightening from the Norges Bank, with consensus shifting to a 50bps rise next week, from a 25bps rise previously.
  • Chinese inflation data overnight could fuel further calls for PBOC easing across the second half of this year as both CPI and PPI data came in below expectations. While CPI rose to 2.7% Y/Y, the pace of increase slowed and fell short of forecast. Similarly, PPI fell well below expectations, and dropped to the lowest level since early 2021 - leaving CNH as one of the worst performers so far Wednesday.
  • US CPI takes focus going forward, with markets expecting headline and core CPI M/M to slow to 0.2% and 0.5% respectively. The speakers slate could be similarly interesting, with Fed's Evans & Kashkari and BoE's Pill on the docket.
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