EUR/SEK further gains likely near term – Danske Bank

Arne Rasmussen, Head of FI Research at Danske Bank, sees SEK depreciating further in the very near term following extra easing by the Riksbank.

Key Quotes

“Today, we will focus on the Swedish inflation data, which could potentially be pivotal for the Riksbank’s monetary policy announcement on 21 December”.

“We still hold the view that the Riksbank will announce additional QE of a total SEK30bn and cut interest rates by 10bp. The latter is not priced into the market at all and thus we see risks skewed to upside for EUR/SEK in the very short term”.

“According to our short-term financial models, a 10bp widening of the two-year SEK-EUR interest rate swap spread would – all else being equal – lead to a 20-figure increase in EUR/SEK”.

“Longer term, we maintain a constructive view on the SEK and we are also short EUR/SEK as one of FX top trades for 2017 as we expect headwinds from macro data to ease and as valuation looks increasingly in favour of the SEK. We target EUR/SEK at 9.30 in 12M”.