Riksbank could signal a rate hike in Q4 next week – Danske Bank

Arne Rasmussen, Head of FI Research at Danske Bank, gives his views on the Krona and the Riksbank.

Key Quotes

“The SEK was under pressure at the start of the week on the back of souring global risk sentiment, and EUR/SEK has retraced some 50% of the recent descent from 10.70 to 10.10. However, Swedish data has been relatively resilient and headline inflation Riksbank-friendly, so that is not the reason for the SEK sell-off”.

“Our short-term rates models suggest the fair value is around 10.25 and near term, EUR/SEK will be in the hands of risk appetite, albeit focus will soon turn to the Riksbank meeting next week”.

“We expect an unchanged repo rate path for now and a signal of a Q4 rate hike (currently the market is pricing in 10bp before year-end), which may give some support to the SEK. However, the Riksbank will probably avoid giving a too hawkish impression and thereby keeping premature SEK appreciation at bay”.