Riksbank shift may help the SEK
We expect the Riksbank to remove its easing bias and change the projected repo rate profile to reflect an earlier tightening. The July repo rate forecast had a precautionary likelihood of a cut this year and a hike in the policy rate in Q3 2014. Swedish rates have risen during August on the back of the strong data flow from Sweden, but EURSEK is broadly unchanged on the month. This dislocation between rates and FX suggests that EURSEK has scope to move lower. BNP Paribas STEER, our short-term fair value model, indicates that the pair should be trading around 8.5400.
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BNP Paribas