NORGES BANK: Gearing Up For Cuts From Mid-2025
The Norges Bank’s “judgement factor” pushed the rate path higher through Q2 2025 (i.e. a hawkish adjustment relative to the Norges Bank’s model’s output), underscoring the Bank’s view that rates will need to be held at 4.50% through 2024.
- However, from Q3 2025 to Q4 2026, it had the opposite impact (i.e. it pulled the rate path lower than implied by the models). This suggests Norges Bank are gearing up for a swifter pace of easing from the middle of next year.
- The exchange rate had the largest upward impact on the rate path through the forecast horizon (as expected), with the “Petroleum prices and investment” component also having a positive impact.
- “Prices and wages” pulled the path lower, reflecting the Norges Bank’s overestimation of inflation pressures, though the “external factors” channel had a larger downward impact. This reflects lower expectations for policy rates abroad since the June decision.
- “Domestic demand” had a surprisingly small impact, with the uptick in capacity utilisation and resilient labour market likely offsetting weakness in recent activity data.
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FOREX: FX OPTION EXPIRY
Of note:
EURUSD 1.17bn at 1.1095/1.1100.
USDJPY 1.7bn at 146.60/146.75 (wed).- EURUSD: 1.1000 (1.47bn), 1.1035 (333mln), 1.1050 (546mln), 1.1075 (335mln), 1.1090 (200mln), 1.1095 (554mln), 1.1100 (621mln).
- USDCAD: 1.3595 (460mln).
- AUDNZD: 1.1000 (300mln), 1.1025 (340mln).
- USDZAR: 17.75 (480mln).
EURIBOR OPTIONS: Put fly
ERV4 97.00/96.87/96.75p fly, bought for 3.5 in 4k.
CHINA-EU: Chinese EVs To Face Hefty 36.3% Duty-MLex
(MNI) London - Joanna Sopinska at MLex posts on X: "Chinese EVs to face hefty definitive EU countervailing duties of up to 36.3 percent under the proposal disclosed today [...]. If EU governments don't oppose the measures, they will enter into force by Oct. 30 and stay in place for 5 years. All China-made EVs, including EU and US brands, will be affected, with Tesla facing the lowest import duty of 9 percent. The definitive countervailing duties won't be imposed retroactively and the provisional measures won't be collected, the proposal says."
- The imposition of provisional tariffs in July has already dented in EV sales to Europe. Data from Rho Motion showed sales in the EU down 7.8% in July. This compares to a 31% increase in China, and 7.1% growth the the US and Canada.
- China has lodged a complaint with the WTO regarding the provisional tariffs, arguing that "the EU's preliminary ruling lacks a factual and legal basis, seriously violates WTO rules,".
- In order to counter the tariffs, some Chinese firms have moved to boost production in countries with tariff-free access to the EU, such as Morocco and Turkey, as well as constructing new factories within the EU.
- As EU Observer reports, "some EU governments themselves are unconvinced by the need for tariffs. In an advisory vote on the tariffs in mid-July, 12 EU countries backed the tariffs, four voted against and 11 abstained. Further discussions and a formal vote are set to be held in October. "
