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SWEDEN: Activity Data Key To Riksbank Outlook, EURSEK and USDSEK Techs Bearish

SWEDEN
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Although the Riksbank have now entered a more cautious phase of monetary policy setting, we think the bar to at least one more cut at some point this year is quite low. This suggests downside risks to market pricing for a year-end policy rate of 2.06% (i.e. less than one more 25bp cut, according to latest estimates from SEB).

  • Activity data over the next two weeks (LFS labour market, Economic Tendency Indicator and final Q4 GDP) will be key in assessing the extent to which past cuts are feeding through to the real economy. Although January CPI was much firmer than expected (details released next Tuesday), the Riksbank have emphasised that a stronger economy is “a necessary condition for inflation to stabilise close to the target going forward”.
  • Weak activity data could prompt a stalling of this month’s SEK rally, but technical conditions in EURSEK and USDSEK remain bearish for now.
  • EURSEK is 0.5% lower today, fully unwinding yesterday’s relief rally. The cross hovers around the Sep 27th low of 11.2450, clearance of which would expose the June 20th low at 11.1824.
  • USDSEK is down 1%, narrowing the gap to 10.6811 (the 50% retracement of the September – January bull leg).
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Although the Riksbank have now entered a more cautious phase of monetary policy setting, we think the bar to at least one more cut at some point this year is quite low. This suggests downside risks to market pricing for a year-end policy rate of 2.06% (i.e. less than one more 25bp cut, according to latest estimates from SEB).

  • Activity data over the next two weeks (LFS labour market, Economic Tendency Indicator and final Q4 GDP) will be key in assessing the extent to which past cuts are feeding through to the real economy. Although January CPI was much firmer than expected (details released next Tuesday), the Riksbank have emphasised that a stronger economy is “a necessary condition for inflation to stabilise close to the target going forward”.
  • Weak activity data could prompt a stalling of this month’s SEK rally, but technical conditions in EURSEK and USDSEK remain bearish for now.
  • EURSEK is 0.5% lower today, fully unwinding yesterday’s relief rally. The cross hovers around the Sep 27th low of 11.2450, clearance of which would expose the June 20th low at 11.1824.
  • USDSEK is down 1%, narrowing the gap to 10.6811 (the 50% retracement of the September – January bull leg).