Might Thursday's Riksbank Meeting be a Crowning Moment for Sweden's Crown?
In the European currency space, Sweden's open economy with its trade exposure to the euro zone often sees traders viewing the Swedish crown (EURSEK) as a surrogate play on the single currency itself. Dutch bank ING argued on Monday that "a positive French election outcome" had resulted in a stronger SEK versus the EUR reflecting the Swedish crown's "leveraged nature as a [euro zone] break-up risk play." The stronger the risk of a break-up the weaker the crown and, as on Monday, vice-versa. But traders will also have to factor in that domestic monetary conditions in Sweden may intrude on this scenario later this week. Sweden's central bank, the Riksbank, meets on Thursday and ING, for one, believes that as a monetary policy statement is due, there is scope for forecast revisions. ING feels there is an "increased risk" that the Riksbank will formally announce the end of quantitative easing leading markets to both start speculating about the timing of the Riksbank's first rate hike and triggering a renewed rally in the value of the SEK.
Written by Neal Kimberley, External Currency Analyst.
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