Norway CB Steadies Hand, But Tilts Hawkish

As widely expected Norway's central bank left rates on hold at 1.25%, but reaffirmed a slight hawkish bias that saw the krone rally nearly 1% in a few minutes. Norges Bank said that it anticipates its key rates to be 0.75%-1.75% by year end. That would seem neutral, 50 bp on either side of the current target. However, it also added that it may have to raise rates earlier than projected. It has completely shrugged off the disappointing retail sales report earlier today (-2.5% vs consensus -0.5%). The krone was among the strongest currencies against the dollar last month but has seen the enthusiasm fade, perhaps with the easier oil prices, amid unwinding of last month's gains. But today's hawkish comments, which have seen short-term Norwegian rates firm, but the Nokkie bulls back in the driver's seat. Look for the euro to slip back toward NOK8.70 and then NOK8.65. One NOK6.15 goes, there is little to stop the US dollar from testing NOK6.0 again.