Norges and Swiss central banks meet to garner attention this week - BBH

Research Team at BBH suggests that in addition to the major central banks meet, the Norges and Swiss national bank meetings are also going to attract investor attention this week.

Key Quotes

“Norges Bank meeting

• The market had felt comfortable with ideas that Norway's central bank would leave the deposit rate at 0.5% when it meets on March 16.  However, before the weekend, Norway reported a soft February CPI report, and it captured some imaginations.  It accelerated the krone's slide.  The euro rose 2.65% against the krone last week, the most in over a year.  It was pushing on an open door as the euro had already begun rallying against Nokkie and rose 1.1% against it the previous week, which at the time was the most since last August.  
• The 0.4% rise in February consumer prices was the largest increase since last September, but it was only half was what had been anticipated.  The year-over-year rate fell to 2.5% from 2.8%, and the core rate, which excludes energy and tax changes, fell to 1.6% from 2.1%.  The selloff in the krone, not just against the euro but on a trade-weighted basis in the last couple of weeks, takes pressure off the central bank to do something it does not really want to do.”    

“Swiss National Bank meeting

• The euro rallied against the Swiss franc at the end of last week and reached its best level in three months.  The increase in Swiss sight deposits seems to reflect that the SNB had been actively defending the CHF1.0650 area, where the euro has chiseled out a bottom since the end of January.  
• Separately, we note the convergence of short-term German and Swiss rates.  Consider that over the past year, the Germany two-year yield has fallen 38 bp to minus 85, while the Swiss two-year yield has risen 16 bp to minus 95.  Despite the low level of anxiety over the Dutch election and the ECB exit talk, the German two-year yield was flat to slightly lower last week.  The comparable Swiss yield was up nearly seven basis points.  Can the Swiss begin normalizing policy toward the end of the year, maybe after the German elections, or is it a 2018 story?”