12 Feb 2016
Riksbank Review: 15bp is not enough for SEK – Nomura
Research Team at Nomura, notes that the Riksbank cut the repo rate by 15bp to -0.5%, more than what was expected by the market, and explained that it is ready to do more.
Key Quotes
“It also decided to reinvest the coupons and maturing government bonds from its current QE programme, highlighting its preparations to possibly alter its QE programmes and enter into SGBIs, reminding us of the possibility of FX intervention. However, this was not enough for the market, and SEK is currently trading pretty much where it was before the decision, evidence of the current market psyche that there is little the Riksbank can do to stem SEK appreciation.
The Riksbank is still in an easing cycle, but the possibility of a rate cut in the near term is now lower and will depend on the prevailing rate of SEK and market risk sentiment. At current levels SEK (on a TWI basis) is not that strong, but it is stronger than the Riksbank would like it to be and we cannot rule out FX intervention.
If EUR/SEK approaches 9.20, market concerns over SEK-selling intervention and/or additional easing will likely rise again, but we would not be surprised if EUR/SEK depreciated to 9.30 into the ECB meeting. Nonetheless, into the ECB meeting, tactical EUR/SEK short positions from above 9.50 are attractive in our view.”
Key Quotes
“It also decided to reinvest the coupons and maturing government bonds from its current QE programme, highlighting its preparations to possibly alter its QE programmes and enter into SGBIs, reminding us of the possibility of FX intervention. However, this was not enough for the market, and SEK is currently trading pretty much where it was before the decision, evidence of the current market psyche that there is little the Riksbank can do to stem SEK appreciation.
The Riksbank is still in an easing cycle, but the possibility of a rate cut in the near term is now lower and will depend on the prevailing rate of SEK and market risk sentiment. At current levels SEK (on a TWI basis) is not that strong, but it is stronger than the Riksbank would like it to be and we cannot rule out FX intervention.
If EUR/SEK approaches 9.20, market concerns over SEK-selling intervention and/or additional easing will likely rise again, but we would not be surprised if EUR/SEK depreciated to 9.30 into the ECB meeting. Nonetheless, into the ECB meeting, tactical EUR/SEK short positions from above 9.50 are attractive in our view.”