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Upside For NOK/SEK After Recent Rally‏

ByDanske Markets
Published 11/04/2013, 05:09 AM
Updated 05/14/2017, 06:45 AM
NOK/SEK
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In the past week we have received disappointing trade balance, retail sales data and PMI data out of Sweden. The data support our view that Q3 GDP data will be weak and that the Riksbank will deliver a soft message at the December monetary policy meeting. Hence, we continue to hold the view that the market will postpone the timing of the first rate hike in Sweden and that the market might start pricing in a probability of a Swedish rate cut. This week industrial production data and Riksbank minutes will be in focus.

Norwegian data have also been surprisingly weak the last couple of months, but recent data have surprised to the upside, pointing to a stabilisation in growth. This week manufacturing data will take the limelight.

In the FX market we reiterate our positive view on NOK/SEK. A view based on that i) the room for negative central bank surprises is biggest in Sweden as Norges Bank already assumes modest growth and inflation domestically, ii) relative data releases are currently supportive for NOK/SEK, iii) a soft ECB is expected to have a bigger impact on the Riksbank than on Norges Bank and iv) the improved liquidity situation in FX primarily benefits NOK.

We also keep our outright negative short-term view on SEK. It is based on our Riksbank view and a SEK-bearish technical picture indicating that a move towards 8.9575 is in the pipeline.

We now expect the ECB to cut the refi rate by 25bp in December. The likely reaction from the Danish Central Bank (DN) will be to cut the lending rate by 10bp to 0.10% respectively. Today DN is set to release October's currency reserve figures. We expect the currency reserve to have remained unchanged.

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