SEK focused on the Riksbank meeting

Morten Helt, Senior Analyst at Danske Bank, noted the Riksbank is seen leaving its key rate unchanged at this week’s meeting.

Key Quotes

“In the Scandies, the upcoming Riksbank meeting will take centre stage. We expect the Riksbank to announce on 27 April that it will not extend the current QE programme, which expires at the end of June, to avoid jeopardising the functionality of the Swedish government bond market”.

“To balance this risk, we expect the Riksbank to flatten the repo path, postponing the first rate hike by another quarter or two”.

“On 18 April, we raised the EUR/SEK 1M target because we think it will try to avoid sending a hawkish message. In general, we still expect EUR/SEK to move slowly and gradually lower over the forecast horizon as valuation and relatively strong fundamentals kick in targeting 9.30 and 9.20 in 6M and 12M, respectively”.

“However, we would wait to enter/add to short positions until after the Riksbank meeting though, as we could actually see even better levels ahead. That being said, once the Riksbank meeting has passed the market will soon start to digest the next set of inflation numbers. April numbers will bounce higher, to get more in line with the Riksbank’s forecast. That will likely lend support to the SEK and send EUR/SEK lower”.

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