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9 Feb 2015
Risk of a small cut by the Riksbank this week – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, views there exists a slight risk of a small cut in the repo rate below the zero level by the Riksbank, as policy inaction in this ‘global-easing’ might lead to a sharp appreciation of the SEK vs. the EUR.
Key Quotes
“While Swedish inflation data has surprised on the upside in recent weeks, there has been a lot of change in the policies of other European central banks.”
“The decision by the SNB to walk away from its EUR/CHF1.20 floor meant that it would no longer be buying EUR is such large quantities. The ECB has announced its QE policy. Once this kicks in next months, downside pressure on the EUR could last some time."
“Also, both the SNB and the DNB have cut rates into negative territory in an effort to prevent their respective currencies from gaining too much ground vs. the EUR.”
“Policy inaction from the Riksbank this week raises the risk that it may result in an unwanted appreciation of the SEK vs. the EUR. This means that at the very least the Riksbank is likely to offer very strongly worded forward guidance this week, though we see a tangible risk of a small cut in the repo rate below the zero level to stave off the risk of a sharp fall in EUR/SEK.”
“On Friday the Riksbank published the results of its latest business survey. Interviews with 42 of Sweden’s largest companies brought the result that economic activity was at a standstill”
“Sweden is an open economy with strong trade links to the Eurozone. The slow recovery in the Eurozone is cited at the prime factor responsible for hampering growth despite the benefits of cheaper oil and the weaker SEK.”
“The worrisome results of this survey increase the risk of policy action from the Riksbank this week.”
“On the announcement of a surprise rate cut EUR/SEK could spike back towards 9.60, though we continue to favour buying USD/SEK.”
Key Quotes
“While Swedish inflation data has surprised on the upside in recent weeks, there has been a lot of change in the policies of other European central banks.”
“The decision by the SNB to walk away from its EUR/CHF1.20 floor meant that it would no longer be buying EUR is such large quantities. The ECB has announced its QE policy. Once this kicks in next months, downside pressure on the EUR could last some time."
“Also, both the SNB and the DNB have cut rates into negative territory in an effort to prevent their respective currencies from gaining too much ground vs. the EUR.”
“Policy inaction from the Riksbank this week raises the risk that it may result in an unwanted appreciation of the SEK vs. the EUR. This means that at the very least the Riksbank is likely to offer very strongly worded forward guidance this week, though we see a tangible risk of a small cut in the repo rate below the zero level to stave off the risk of a sharp fall in EUR/SEK.”
“On Friday the Riksbank published the results of its latest business survey. Interviews with 42 of Sweden’s largest companies brought the result that economic activity was at a standstill”
“Sweden is an open economy with strong trade links to the Eurozone. The slow recovery in the Eurozone is cited at the prime factor responsible for hampering growth despite the benefits of cheaper oil and the weaker SEK.”
“The worrisome results of this survey increase the risk of policy action from the Riksbank this week.”
“On the announcement of a surprise rate cut EUR/SEK could spike back towards 9.60, though we continue to favour buying USD/SEK.”