Currency movements might become an increasingly important issue both for the Fed and the ECB. Recent inflation data will certainly have given the Riksbank some relief but the krona is a worry -- imported inflation can potentially dampen again. Wage expectations are moving in the wrong direction. Further Riksbank action cannot be dismissed despite current spot inflation.
Time to go long Swedish interest rates. We believe positioning in the market is more neutral now after the 'sell off' over the last few weeks. Moreover, we think there are reasons to price in a relative high probability for further measures by the Riksbank. Against that background we think it is time to buy Swedish rates.
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