Monetary Policy

This report looks at investment implications, for Norwegian assets, given the recent meeting, from the Norges Bank. 

This report is a quick take on our views on UK bonds and FX, given the recent budget.

Given the meetings between the Bank of Japan, the Bank of England, and the Swiss National Bank, our highest convictions views are:
Overweight UK Gilts. It is also time to sell sterling. We are short sterling, as of 1.30. 
Underweight JGBs. Correspondingly, be long the yen. 
A short CHF/JPY position remains a core holding. Selling GBP/JPY is also a great trade.

The trade war complicates the Bank of Canada’s task to achieve stable inflation. But the bottom line is that rising uncertainty, which will dampen business sentiment, will cause the BoC to cut rates by at least what is priced in the CORRA curve, and likely to 2%. The CAD, which is very oversold, might not depreciate much. The big trade is a bet on a spread widening for Canadian provincial bonds.

The fiscal stimulus announced at this year’s National People’s Congress is only slightly larger than last year’s. Notably, the details of the measures suggest that it will be challenging for fiscal stimulus to effectively counterbalance the country’s economic difficulties this year.

Overnight, the RBA cut the cash target rate for the first time since 2022, marking the beginning of the policy easing cycle in Australia. However, the RBA will proceed cautiously with further rate cuts, given a tight labor market and still elevated services inflation. This will keep Australian government bond yields elevated versus global yields, benefitting the Australian dollar.