Sweden starts off on a slow note, with PPI on Tuesday. On Wednesday, NIER will release August business and consumer confidence surveys as well as its updated forecasts. On the same day Statistics Sweden will publish new financial market stats and the July trade balance. On Thursday, July retail sales data is due to be distributed. The week will end with wage statistics from SCB. Our overall view is for data to continue on a stronger note, but we would be surprised to see, for example, confidence data becoming any stronger.
We have revised our GDP forecast for Sweden down to 1.9% for 2014. It is very different from Norway where mainland GDP grew a stunning 1.2% q/q in Q2.
We still like the Scandi currencies and currently we favour the NOK as the market is expected to continue pricing in an upward revision of the new rate path from Norges Bank at the September meeting. We also like the SEK but we prefer to be sidelined before the 4 September Riksbank meeting and the general election on 14 September.
We still like to pay NOK swap 2y1y against Sweden, but we have become more cautious with the outright position to pay NOK 2y2y swap and now prefer the spread against EUR. The reason is the increased likelihood of more ECB easing as early as September and the factors actually speaking against a higher rate path from Norges Bank. The latter would speak in favour of going long NGBs against bunds once again as we did ahead of the June Norges Bank meeting. But for now we stay sidelined in respect of NGBs.
In Denmark, it will be worth keeping an eye on the preliminary national accounts data for Q2, where the main focus will be on real growth in GDP. We predict growth of 0.25% q/q and 1% y/y, which is less than we anticipated in our previous forecast.
The Danish Ministry of Finance is due to publish the autumn budget outlook, with updated forecasts for the borrowing requirement in 2014 and 2015. We expect a modest downward revision of the borrowing requirement in both 2014 and 2015 given that the government has so far seen higher revenue and lower expenditure for the first six months relative to the estimated budget. Furthermore, we expect higher revenue from the pension fund taxes.
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