ENERGY: Canada Week: Carney Says U.S. Trade Deal May Include Tariffs

• MNI: US MBA: MARKET COMPOSITE -2.6% SA THRU JUN 13 WK

• Some small demand for the Yen here, testing its best level against the EUR, GBP, USD and the AUD.
• US Yields are testing session lows, with the Tnotes at session high, but the move in Govies are gradual, nothing fast.
• Yesterday's low in the USDJPY is at 144.41 and will present the first hurdle, and a break below that level, would open back to 143.98.

SEK weakness has extended since this morning’s Riksbank decision, where rates were cut to 2.00% as expected but the signals in the policy statement and June MPR rate path leant dovish. In the press conference, Governor Thedeen tried to play down the dovish signal from the front-end of the June rate path (which assigns a ~50% probability of another cut this year). However, markets may be paying some attention to the downward rate path revision in 2026-2028. The “terminal” point of the rate path in Q1 2028 was 2.01%, well below the 2.25% level that had anchored long-end projections since the September 2024 decision (when the Riksbank’s revised 1-3% nominal neutral estimate was announced). 

• A reminder that the first three quarters of the rate path represent the Executive Board's best assessment of policy rates, while further out the path is an output of staff's macroeconomic models.
• This long-end revision is particularly notable in the context of the June MPR's updated macroeconomic projections. The medium-term forecasts for unemployment, the GDP gap and CPIF ex-energy are all relatively unchanged compared to March. Meanwhile, the long-term KIX effective exchange rate forecast is actually higher than before (which indicates a weaker exchange rate and all else equal would be a hawkish rate path input).
• Overall, the June projections suggest the Riksbank staff’s macroeconomic framework is structurally more dovish compared to March, with uncertainty-related weakness in the next year or two needing to be compensated with lower rates through the projection horizon. The June meeting minutes (released June 25) will provide insight on whether such an outlook is echoed by Executive Board members.
• EURSEK is now up 0.5% on the session, through the May 27 high of 10.9937 and narrowing the gap to the next resistance at 11.0850 (April 28 high).
• The decision has reinforced bullish technical conditions in NOKSEK, with the cross up 0.3% today and approaching clustered resistance around 0.9646 (March 21 high) and 0.9651(trendline drawn from the March 2022 high).