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Waning USD, Hawkish Norges Bank Tilt USD/NOK to Fifth Lower Low

FOREX
  • The greenback trades softer following the Wednesday Fed decision, helping pressure the USD Index to a new pullback low at 101.915 as the FOMC statement indicating the Fed are not far off the peak of their tightening cycle. The USD weakness has favoured high beta and growth proxy currencies so far Thursday, putting NOK and AUD to the top of the G10 pile.
  • The Swiss National Bank pressed ahead with plans to tighten policy despite local turmoil in the domestic banking sector. This reinforces the SNB's view that liquidity provision and enhanced access to USD liquidity will allow the bank to continue their medium-term focus on inflation, raising the risk for further tightening going forward.
  • In Norway, the Norges Bank raised rates by 25bps to 3.00%, as expected, however the accompanying Policy Report erred hawkishly, with the peak rate notched higher this year (3.60% by year-end). Also worth noting that May was namechecked as next likely hike - this is not an MPR meeting (next is June) so doesn't meet the assumption the bank would proceed with 25bps steps each quarter. As such, the Norges Bank outlined a more hawkish approach to policy across 2023, helping EUR/NOK briefly print a new daily low at 11.2551.
  • Looking ahead, the BoE decision is expected to see a 25bps hike to 4.25%, with a focus on the vote split among the MPC.
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