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Swedish December Rate Cut Increasingly Likely

ByDanske Markets
Published 11/25/2013, 02:35 AM
Updated 05/14/2017, 06:45 AM
EUR/SEK
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NOK/SEK
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Statistics' Sweden (SCB) investment survey and the National Institute for Economic Research's (NIER) business and consumer confidence surveys did nothing to alter our view of a Riksbank repo rate cut 17 December.

Even though a Swedish December rate cut appears increasingly likely, we have decided to reduce risk exposure in the very front end. Not least as a rate cut is now priced with a relatively high probability.

This week focus in Sweden will be on Q3 GDP numbers. We look for a q/q growth rate of 0.3% and a calendar adjusted y/y rate of 0.4%. Our forecast is well below consensus which looks for a 0.5% q/q outcome. If we are correct, it should push EUR/SEK higher once again and we continue to target 9.00 in the cross.

Last week Norwegian mainland GDP came in slightly stronger than expected at +0.5% q/q. Mainland growth is now in line with the Norges Bank forecast and supports our view that Norges Bank will not cut rates in December and probably present an almost unchanged rate path.

Seen in relation to the forthcoming GDP numbers from Sweden this week the numbers support our long NOK/SEK view. A case basically based on these three pillars: i) Q3 growth outperformance in Norway relative to Sweden, ii) Core inflation higher in Norway than in Sweden, iii) Riksbank rate cut and Norges Bank unchanged in December.

In Norway all eyes will be on the Regional Network Report ahead of next week's Norges Bank meeting. We believe the report will confirm that Norges Bank will keep rates unchanged.

To Read the Entire Report Please Click on the pdf File Below.

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