Relative monetary policy favours long NOK/SEK - RBS

Nick Mannion, Research Analyst at RBS, notes that the Norges Bank left policy unchanged and shifted to a more neutral stance at it September meeting, in line with their expectations.

Key Quotes

“In contrast, we expect the Riksbank to extend its QE programme in October as it becomes increasingly evident that it remains too optimistic on inflation. While the September policy minutes revealed some differing views amongst Board members on the costs and merits of further policy easing, there was still strong consensus on the high preparedness to act should prospects for inflation deteriorate and not much to indicate that members feel that QE may have reached its limit.

Relative monetary policy thus favours NOK/SEK longs in our view. The pair has also still looks to have scope to catch up with the recent favourable move in rate spreads.”