Morgan Stanley Recommend Long NOK/SEK

Late on Tuesday Morgan Stanley recommended a long NOK/SEK position.

• They noted that “Norges Bank is slowing its NOK sales dramatically as the Riksbank's SEK FX-hedging programme is about to end.”
• “The absence of central bank flows suggests that NOK/SEK can trade more on fundamentals - which point to a higher NOK versus SEK. Norwegian data have held up while Swedish data have disappointed the most in the G10.”
• “We estimate that Norges Bank-Riksbank policy divergence implies NOK/SEK at SEK1.06, compared to sub-parity today.”
• “NOK/SEK's correlation to risk assets has fallen to roughly zero. Continued lack of correlation suggests that macro factors like global risk demand won't impact the pair much, rendering it a better reflection of the local stories suggesting NOK/SEK topside.”
• The long NOK/SEK recommendation came with the cross trading at SEK0.99, targeting a move to SEK1.06, with a stop set at SEK0.95.