30 Jun 2014
EUR/SEK overbought? – Danske Bank
FXStreet (Edinburgh) - Analyst Jens Pedersen at Danske Bank sees the EUR/SEK entered the overbought territory.
Key Quotes
“Our short-term financial model currently indicates that EUR/SEK is slightly overbought – trading more than 1 standard deviation above its fair value of 9.074”.
“Hence, our short-term model cannot fully explain the move higher in EUR/SEK despite a decline in Swedish interest rates. Thus, in the FX markets, consensus seems to suggest a Norges Bank type of Riksbank forecasts, implying a heightened chance of additional cut(s) and a postponement of the first hike into H2 16!”.
“However, this is somewhat conflicting with interest rate market pricing, which is less aggressive, expecting a cut and a Riksbank that pushes the first projected hike close to year-end 2015. In our view, the pricing in the FX markets implies unusual aggressiveness from the Riksbank, while the view of the interest market is more in line with our own call”. “Hence, given the current pricing, a stronger SEK might very well emerge from the doldrums of the monetary policy decision”.
“However, this is somewhat conflicting with interest rate market pricing, which is less aggressive, expecting a cut and a Riksbank that pushes the first projected hike close to year-end 2015. In our view, the pricing in the FX markets implies unusual aggressiveness from the Riksbank, while the view of the interest market is more in line with our own call”.
“Hence, given the current pricing, a stronger SEK might very well emerge from the doldrums of the monetary policy decision”.
Key Quotes
“Our short-term financial model currently indicates that EUR/SEK is slightly overbought – trading more than 1 standard deviation above its fair value of 9.074”.
“Hence, our short-term model cannot fully explain the move higher in EUR/SEK despite a decline in Swedish interest rates. Thus, in the FX markets, consensus seems to suggest a Norges Bank type of Riksbank forecasts, implying a heightened chance of additional cut(s) and a postponement of the first hike into H2 16!”.
“However, this is somewhat conflicting with interest rate market pricing, which is less aggressive, expecting a cut and a Riksbank that pushes the first projected hike close to year-end 2015. In our view, the pricing in the FX markets implies unusual aggressiveness from the Riksbank, while the view of the interest market is more in line with our own call”. “Hence, given the current pricing, a stronger SEK might very well emerge from the doldrums of the monetary policy decision”.
“However, this is somewhat conflicting with interest rate market pricing, which is less aggressive, expecting a cut and a Riksbank that pushes the first projected hike close to year-end 2015. In our view, the pricing in the FX markets implies unusual aggressiveness from the Riksbank, while the view of the interest market is more in line with our own call”.
“Hence, given the current pricing, a stronger SEK might very well emerge from the doldrums of the monetary policy decision”.