2 Feb 2015
Go long GBP/SEK – JPM
FXStreet (Barcelona) - The JP Morgan Team gives the macro trade setup for GBP/SEK, suggesting going long on the pair at current levels.
Key Quotes
“GBP should be relatively immune to a further rally in global rates in coming weeks since the UK rate curve is now so flat (having priced out the first hike until 4Q16) that it would take expectations of outright BoE easing to push rates even lower.”
“The Swedish curve is also flat (no hike until mid-2017) but we do not exclude that the Riksbank could elect to take rates negative as its February 12th meeting.”
“Inflation in Sweden held up surprisingly well in December which is the main argument against the Riksbank opting for unconventional easing next month. Nevertheless, a rate cut could still be motivated as a response to international developments, not least the risk that failure to cut would elicit a strong rally in SEK, which would surely require the Riksbank to subsequently ease.”
“Buy GBP/SEK at 12.43, stop 12.19.”
Key Quotes
“GBP should be relatively immune to a further rally in global rates in coming weeks since the UK rate curve is now so flat (having priced out the first hike until 4Q16) that it would take expectations of outright BoE easing to push rates even lower.”
“The Swedish curve is also flat (no hike until mid-2017) but we do not exclude that the Riksbank could elect to take rates negative as its February 12th meeting.”
“Inflation in Sweden held up surprisingly well in December which is the main argument against the Riksbank opting for unconventional easing next month. Nevertheless, a rate cut could still be motivated as a response to international developments, not least the risk that failure to cut would elicit a strong rally in SEK, which would surely require the Riksbank to subsequently ease.”
“Buy GBP/SEK at 12.43, stop 12.19.”