In Sweden, the main event in the week ahead is the Riksbank's monetary policy announcement on Thursday (due at 09:30 CEST). Even though our main scenario suggests the Riksbank will not act until December, we must stress that the all but certain downward revision to the Riksbank's inflation forecast will probably be of a magnitude sufficient to warrant immediate action. Put another way, we see a 50/50 chance of a cut on Thursday.
Hence, risks may be biased slightly in favour of a higher EUR/SEK on Thursday. However, we see value in SEK as it is fundamentally cheap. Hence, we remain short EUR/SEK in our FX Trading Portfolio
The coming week brings new data for both housing prices and credit growth in Norway. We expect aggregate credit growth to slow moderately to 5.7% y/y in July but lending to households to continue to increase. The market may, therefore, become a little more uncertain about whether Norges Bank will deliver the rate cut that we expect in September. The week also brings PMI data for August, which will be very interesting after the sharp fall in June and July.
In Denmark, the Nationalbank will release its currency reserves data for August. EUR/DKK has continued to trade above the central parity in August and the deviation of banks net position relative to the projected change in liquidity indicate that intervention has continued in August.
Bond issuance has been resumed in Denmark and the current account limits have been lowered. It was another step towards normalisation of the Danish market. Next step could be an independent rate hike, though we still believe the FX reserves are far too big to justify an imminent rate hike. But a rate hike on Thursday cannot fully be ruled out.
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