Where SEK Differs
The Riksbank returns from its annual summer break to a largely unchanged landscape domestically, but far more challenging external circumstances. As is often the case for small open economies, when general risk aversion is on the rise, any form of policy which can encourage even remote tightening expectations should be off the cards. This is particularly important when large trading partners (Eurozone, UK) are holding the same stance. Similar to what we are seeing for CAD and NOK, policy expectations is showing irrelevance for currency performance: central banks ignore better domestic data; externally Fed policy is the dominant driver. However SEK has one advantage: long positioning is far ‘clearer’ than any other ‘super AAA’, and there is not much the Riksbank can do about it.
Read the full report: UBS