FXStreet (Delhi) – Research Team at RBC Capital Markets, suggests that Riksbank easing (both actual and threatened) has kept EUR/SEK largely range-bound this year.
Key Quotes
“The central bank seems to be particularly sensitive any time EUR/SEK trades down to 9.20. With the promise of further easing or even outright intervention if necessary still hanging over SEK (and the Riksbank set to meet on Dec 15, less than two weeks after the ECB likely eases again on Dec 3), we think it is too early to think about getting long SEK. Nevertheless that may change next year.”
“Early 2016 will see the next triennial wage negotiation in Sweden (covering around 3 million employees or ~63% of the labour force in the private and public sector). The Riksbank’s current strategy seems to be talking up inflation even as it acknowledges the downside risks and is forced to keep easing. But once the triennial negotiations are out of the way, the Riksbank may feel more comfortable allowing EUR/SEK to trade lower. Swedish economic surprises have been positive for most of this year and base effects should help inflation turn higher in 2016. From a longer-term perspective, valuation still supports SEK higher, even if the central bank’s stance means that recovery may take a long time to materialise. We flag EUR/SEK as a trade to watch.”
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