Political risks and inflation numbers near-term headwind for the SEK
Given our base case where the Riksbank hikes in December...
..we recommend using such rallies to (re-)enter short tactical positions
We have argued that the SEK should strengthen (versus the EUR) until December, when we expect the Riksbank to deliver its first hike in seven years: 3M (NYSE:MMM) target 10.20. We return to this later. At the same time, we have highlighted that the political risks not only at home but also globally are headwinds for the SEK in the near term and therefore we have set our 1M target at 10.50. In Reading the Markets Sweden, 28 September , we noted that EUR/SEK began to look oversold in terms of RSI and that political risk could be a fundamental excuse for a correction. Indeed, EUR/SEK has spiked amid political turmoil in the past week. Given our base case on the Riksbank, we adhere to the recommendation to use such rallies to (re-)enter short tactical positions.
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