EUR/SEK was bid on Friday as the cross even breached 10.00 and was rejected just below 10.04, points out the research team at Danske Bank.
Key Quotes
“Despite the temporary headwinds for the SEK related to PPM flows now being out of the way, the SEK has remained under pressure – just as we have argued could be the case. However, this week is all about the Riksbank. If it puts an end to QE without touching the repo rate path (our call), we could see some support to the SEK as the market may deem it as semi-hawkish.”
“We still do not see the Riksbank raising the repo rate next year though and we still think the markets will ponder the consequences of the fragile housing market going forward. Therefore, we think that any rebound in the SEK will be limited. The outcome of the Riksbank meeting is admittedly very uncertain though, which is fairly reflected in implied vols and a more dovish decision like extending QE and/or delaying the first hike is clearly a possible outcome, although it is not our call. In that scenario, we should see another leg higher in EURSEK.”
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