The SEK has traded on a weak note in recent days, ahead of the Riksbank's policy decision due tomorrow at 09:30. In our view this reflects expectations in the currency market of a clearly dovish outcome. It could be argued that it is a bit odd (at least unusual) that expectations are set so high for this meeting given the fact that macro outcomes have not been poor - rather the opposite with, e.g., recent inflation readings higher than the Riksbank predicted. We think the reason for this is ECB's ongoing QE programme, which the Riksbank wants to 'meet' in combination with the fact that it so bluntly has emphasised that it will not tolerate a too fast an appreciation of the SEK - the Riksbank has not only become inflation nuts but also 'krona nuts'.
In addition, we think that the Riksbank wants to step on the gas ahead of the wage negotiations, which roughly means that there is a window-for-action before year-end. The Riksbank is aware that expectations in the market are set high and we do not think it will take the risk of being perceived as being behind the curve, as it would probably send EUR/SEK sharply lower. Hence, it will try to make sure that it does not under-deliver.
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