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6 Feb 2015
Easy Riksbank ahead, SEK no safe haven - UBS
FXStreet (Córdoba) - With the Greek crisis flaring up again and the European Central Bank (ECB) expanding its balance sheet, the search for safe havens in Europe has started again, commented the UBS team, which thinks even though Sweden has some strong economic data to offer, they would cross the Swedish krona off the list of potential safe havens for now.
Key Quotes
“With the Greek crisis flaring up again and the European Central Bank (ECB) expanding its balance sheet, the search for safe havens in Europe has started again. Even though Sweden has some strong economic data to offer, we would cross the Swedish krona off the list of potential safe havens for now”.
“Next week on Thursday, the Riksbank will announce its latest monetary policy decisions. Apart from a stronger commitment to keep rates low until inflation rises back closer to target, negative interest rates and an asset purchase program (QE) are potential options. Negative rates seem to be en vogue now. However, it is unclear how the Riksbank could guarantee a sufficient impact, since its problem is not an excessive foreign demand for deposits like in Switzerland. Even so, we attach only a 30% chance to QE as well, as the recent flow of strong Swedish economic data should make the Riksbank think twice about such a big policy step”.
“Having said that, there remain clear downside risks to Swedish inflation. The Riksbank's Business Survey for January released on Friday shows that Swedish manufacturers remain under pressure to cut costs, while employment remains too high. This and the strong drop in Eurozone inflation indicate that low inflation is not going to disappear soon from the Riksbank's agenda”.
“Meanwhile, the Eurozone economy is catching up, as the broad-based improvements in recent business surveys have shown. Thus, we expect the EUR/SEK to trend sideways around 9.40 in 2015, as the Riksbank remains unable to diverge much from the ECB under current circumstances. Temporary deviations in a range between 9.10 and 9.70 are well possible”.
Key Quotes
“With the Greek crisis flaring up again and the European Central Bank (ECB) expanding its balance sheet, the search for safe havens in Europe has started again. Even though Sweden has some strong economic data to offer, we would cross the Swedish krona off the list of potential safe havens for now”.
“Next week on Thursday, the Riksbank will announce its latest monetary policy decisions. Apart from a stronger commitment to keep rates low until inflation rises back closer to target, negative interest rates and an asset purchase program (QE) are potential options. Negative rates seem to be en vogue now. However, it is unclear how the Riksbank could guarantee a sufficient impact, since its problem is not an excessive foreign demand for deposits like in Switzerland. Even so, we attach only a 30% chance to QE as well, as the recent flow of strong Swedish economic data should make the Riksbank think twice about such a big policy step”.
“Having said that, there remain clear downside risks to Swedish inflation. The Riksbank's Business Survey for January released on Friday shows that Swedish manufacturers remain under pressure to cut costs, while employment remains too high. This and the strong drop in Eurozone inflation indicate that low inflation is not going to disappear soon from the Riksbank's agenda”.
“Meanwhile, the Eurozone economy is catching up, as the broad-based improvements in recent business surveys have shown. Thus, we expect the EUR/SEK to trend sideways around 9.40 in 2015, as the Riksbank remains unable to diverge much from the ECB under current circumstances. Temporary deviations in a range between 9.10 and 9.70 are well possible”.