A The Riksbank rate decision later this morning is still a relatively close call judging by market surveys, with 9 out of 22 economists on Bloomberg predicting another 25bp rate cut to 0.75%. Of the local banks, 4 out of 6 are expecting a cut, suggesting the global improvement, Germany in particular, has impacted more on foreign analysts, with domestic economists maybe more influenced by what up until recently has been a very poor run of domestic data. SEK FRAs, meanwhile, are pricing in a 25-30% probability of a 25bp cut. So, where does all this leave the SEK? Near-term, and given that only a 1/3 of a 25bp cut is currently priced in, a cut is likely to push EUR/SEK higher and more in line with rate spreads to around 8.70-8.75. A no-change, on the other hand, is likely to see EUR/SEK testing the lows from the last 6 months around 8.50. Over the slightly longer-term, however, a Riksbank rate cut or not at this meeting will not change the trajectory which continues to be for a stronger SEK.
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Deutsche Bank