NOK - Q1 GDP data to assess the Norges’ next policy move

Q1 GDP data (Wednesday) will likely act as a catalyst in determining the Norges Bank's next policy move. Lower oil prices are expected to have weighed on activity, with the economy expected to have grown 0.3% q/q in Q1 15 from 0.9% q/q in Q4 14. 

Besides the sharp decline in oil prices during H2 14, mainland GDP, which excludes petroleum production and shipping, is also expected to have moderated, with the Norges Bank forecasting a 0.35% q/q growth for mainland Norway, in line with consensus expectations (0.30% q/q) and the Regional network indicators for growth (0.31% q/q). 

As we recently noted, the stabilization in oil prices, in addition to increased concerns about financial stability, have kept the Norges Bank cautious about easing policy further . 

Yet the probability of policy easing later this year remains significant, particularly if Q1 data disappoint Norges Bank projections in the coming week. 

"With less than a full cut priced for June, we see value in initiating long EURNOK positions if growth disappoints in anticipation of further easing by the Norges Bank in June", says Barclays.