Sweden: Riksbank has more room than ECB – Danske Bank

Riksbank and European Central Bank (ECB) are priced to move in tandem over the next two years, strategists at Danske Bank apprise. EUR/SEK is trading at 10.6698.

Key quotes

“There is certainly a resistance in the Riksbank to once again cutting to negative rates. However, we think it is less debatable that the Riksbank has much more room to cut compared to the ECB without significant effects on the banking system and hitting the lower bound.” 

“The bar for an ECB cut remains very high in our view.”

“We think that the RB should be priced more aggressively relative to the ECB.”

“We have preferred to express our view on the SEK leg through Ribas rather than in FRAs as 3M forward fixing spreads have tightened and the year-end 3M Stibor fixing in particular remains notoriously volatile.”