SEK: The potential Swedish triple whammy in April – Nordea Markets

According to analysts at Nordea Markets, SEK is one of the obvious risks in G10 FX space, if Trump re-ignites the auto tariff talk and also one should watch out for the risk of a very weak April for SEK, after last week, the Riksbank meeting though offered a slight SEK positive take-way.

Key Quotes

“On the positive note, the FX intervention mandate was not prolonged by the Riksbank. This is slight SEK positive, as it makes the KIX-forecast from the Riksbank less of a “potential ceiling" for SEK. Also, the “no news” on the Riksbank balance sheet is a short-term SEK positive, as the bond maturing on 12th of March will lead SEK excess liquidity roughly 40bn lower. But, April looks worrisome for SEK due to three factors.”

“First, the Riksbank will likely decide to pre-reinvest the bond that matures in Dec-2020 already at the April meeting. If fully pre-reinvested before maturity (72bn SEK), it will take the Riksbank balance sheet to new record highs (light blue scenario). This is not a SEK positive scenario.”

“Second, the unchanged rate path looks out-of-sync with the economic outlook in Sweden. PMI details are still worrisome, which may make the Riksbank re-think the rate path already in April alongside less optimistic economic forecasts.”

“Third, the bulk of OMX dividends are paid out between late March and mid-April, why SEK already has a weak seasonality pattern in March/April on top of the risk of a dovish Riksbank.”

“10.35 is within reach on the downside in EUR/SEK short-term, but should we see such a move lower, we would buy the dip targeting even higher levels in EUR/SEK than currently.”