EUR/NOK has recently spiked to a three-year high but with a better global FX environment and a low risk of a Norges Bank rate cut, we reiterate our view that it is attractive to position for EUR/NOK downside through a risk reversal in the option market.
EUR/DKK has moved higher recently. The cross could edge higher this week and long EUR/DKK via 3M forwards still looks attractive.
Sweden has started the big catch-up
We have a flood of Swedish data to look forward to. Our assessment is that they overall will provide increased support to the improving picture of the Swedish economy. Hence, the Swedish catch-up story should be further confirmed and thereby support our view that Swedish fixed income will underperform against core, that yields overall will continue to move higher and that SEK will perform.
In the latest issue of Reading the Markets Sweden we reiterate our core view that we see further underperformance in 5Y bonds versus Bobls, more flattening of the BEI rate curve and more steepening of the FRA curve, JUN14/JUN15. However, we adjust profit levels, as well as loss levels and thus lock in a small profit in these three trades. We also take a closer look at convexity on the Swedish government curve. We argue it is far too low relative to current money market expectations.
However, back to this week’s Swedish data. Today’s PPI data should not in itself be all that interesting but seen together with Tuesday’s trade balance data it will provide us with the first solid input to Q3 demand. On Wednesday we will be able to look deeper into Q3 general activity, as the National Institute for Economic Research publishes its August business and consumer confidence surveys as well as the Economic Tendency Indicator. On Thursday retail sales add to our first feel for Q3 demand growth and we expect this number to come out on the positive side as well but we are wary that the exceptionally sunny weather in July could play some tricks with our forecasts.
To Read the Entire Report Please Click on the pdf File Below.