Today’s Comment
As expected yesterday was a fairly quiet day in the financial market without any interesting economic indicators and the Americans celebrated Labor Day. This morning Bank of Japan made its interest-rate announcement.. Quite as expected, the rate was not changed, and the central bank stuck to its general assessment of the economy, i.e. that there are still indications of a modest upswing, and Japan is slowly heading for better times. Overnight the yen appreciated by about 0.7% against the euro, but this is presumably a result of the slightly negative sentiment in the equity markets in Asia rather than the announcements from the central bank.
In a speech yesterday, the governor of Norges Bank’s, Gjedrem, touched upon the development of the Norwegian economy and its outlook on interest rates. Gjedrem acknowledged that the Norwegian economy is currently slowing down a bit and inflation is a bit on the low side. Even though he said that the market’s expectations of a repo rate of 2.75% in the autumn of 2012 are a bit on the low side (Norges Bank expects a rate of 3.5% in the 2-year term), he also said that the interest rates will remain low for a long period of time and furthermore that it is expected that the Norwegian krone will weaken over time.
The announcements were more or less in line with those of the recent monetary-policy report, and the speech did not cause any major fluctuations in the exchange rate.
However, Gjedrem revealed that Norges Bank is planning to change the conditions for the banks' deposits in and loans from the central bank. Briefly, Norges Bank wants to increase the costs for the banks when they deposit large amounts of liquidity with the central bank – primarily to ensure a smoother flow of liquidity in the money market. Gjedrem did not reveal when Norges Bank reckons it will introduce such measures – only that it is working on it.
Today’s Key Events
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07:45 Unemployment (CHF)
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10:00 Industrial production (NOK)
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12:00 Industrial orders (DEM)
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19:30:00 Speech by Mr Stark of the ECB (EUR)
Tuesday night:
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01:50 Machinery orders (JPY)
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01:50:00 Trade balance (JPY)
Today’s Chart – EUR/NOK
