The week in Sweden kicks off early Monday morning with a speech from theRiksbank’s Jansson and shortly after that, May PMI is set to be released. We estimatethe PMI has slowed somewhat.
We believe the ECB will surprise the markets by boosting liquidity through a new 3YLTRO while at the same time cutting the refi and deposit rates, bringing the latter intonegative territory. We believe that Swedish rates up to 5Y will follow European onesand decline.
After the week Swedish GDP numbers and our view that the market can price in moreeasing in Sweden, we lift our 1M target for EUR/SEK from 9.10 to 9.20. Especially aswe are approaching summer when liquidity is normally low, the risk of a significantincrease in EUR/SEK should not be neglected. We still favour positioning for SEKweakness through a long NOK/SEK position.
The most important Norwegian release for the markets this week will be the results ofNorges Bank’s latest regional network survey. The network has pointed to weakergrowth than has actually been the case over the past three calendar quarters and weexpect this trend to continue into 2014, with the aggregated output index climbing tojust below 1.0. This would be its highest level since Q2 13 and confirms that growth inthe Norwegian economy is picking up despite everything.
Last week, Norges Bank confirmed that it is now just a matter of time before theselling of foreign currency will start. We keep our positive NOK view as we doubt themarket will start to price in rate cuts in Norway despite the soft ECB we are callingfor.
Read the full report: FX Daily
Danske Bank