EUR/SEK is partying like its 1998 – Nordea Markets

EUR/SEK is partying like its 1998, with the upcoming Riksbank meeting on 6 September and the general election on 9 September being two domestic negative drivers, according to analysts at Nordea Markets. 

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.”

“Fears ahead of the Swedish election are definitely impacting the SEK.”

“The recent rhetoric from the currently largest party Social Democrats (which has called the other parties “small” while also promising hiked taxes on capital) have been polarizing the political landscape further. More polarization, the greater the difficulty to form government, the longer it will take to form government, and the higher is the likelihood of unusual constellations.”

“We expect political worries to keep influencing the SEK negatively ahead of the election. But, if SD were to get to form part of government, or get lots of influence, it would probably be good news for the SEK, as it might boost both domestic demand and core inflation.”

“For now we stay long EUR/SEK ahead of the election.”