Swedish election and Riksbank angst spilling over to Norway – Nordea Markets

Analysts at Nordea Markets points out that the SEK has continued to weaken, with the upcoming Riksbank meeting on 6 September and the general election on 9 September being two domestic negative drivers.

Key Quotes

“The two most positive things which can be said about the krona currently is: i) it is cheap and ii) speculative accounts are likely short the krona – and that when exiting SEK shorts the door may be quite narrow.”

“A pattern of higher highs in the cross was a sign of momentum funds selling the krona in late April, and the door got crowded when the Riksbank eventually triggered position-squaring in May.”

“Despite a looming rate hike from Norges Bank and inflation topping expectations, the NOK appears to be hit by the Swedish disease, not that the late-cyclical mindset of many market participants is helpful.”

“Both USD/NOK and USD/SEK tend to rise ahead of an inversion of the US yield curve: as market participants fear the US expansion may be in the late innings (potentially bad news for risk sentiment) it may hold them back from buying the Scandinavian currencies.”