SEK: EURSEK Pierces Nov 11 High, But Remains Stuck In Familiar 10.90-11.10 Range
EURSEK has pierced the Nov 11 high of 11.0096, now +0.4% today, with Scandi FX pressured by the latest extension higher for the DXY. This week’s domestic calendar has been light (and is expected to remain as such), leaving SEK susceptible to swings in broader risk sentiment. The fallout from Nvidia’s earnings this evening and tomorrow’s US labour market report will likely prove consequential in the short-term.
- Zooming out, the cross remains comfortably within the 10.90 to 11.10 range that has contained price action since the start of September.
- Progress on Sweden’s expected economic recovery will be key in determining the medium-term trajectory. Recent developments have been positive, though the final Q3 GDP report on Nov 28 will be important to confirm the solid signals from the (often unreliable) flash release.
- Note that the December 2026 RIBA future has risen from just below 1.70% in mid-October to ~1.85% at present, consistent with our view that the risk of a hike is greater than the risk of another cut over a 6-12 month horizon. That hasn’t had much impact on the exchange rate though, as the bar to a Riksbank policy rate move appears very high in the near-term.
- Last week, JP Morgan recommended reinitiating a short EUR/SEK trade (entry 10.9678). They wrote that “With Eurozone data surprises at new YTD highs, and DM PMI data due next week, we think the market is under appreciating the Eurozone cyclical upswing, particularly as European bank stocks broke out to new highs this week. SEK is a high beta cyclical proxy for these macro signals. US equity weakness is a risk for SEK, but we think this can also be its strength if there is a rotation into Europe”.
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- EUR/USD: Oct22 $1.1595-00(E1.1bln), $1.1810-30(E1.1bln); Oct23 $1.1515-25(E1.1bln), $1.1555-65(E1.3bln), $1.1575(E1.2bln), $1.1650(E1.1bln), $1.1750-70(E2.8bln)
- USD/JPY: Oct24 Y150.00($2.0bln)
- AUD/USD: Oct23 $0.6585-00(A$1.1bln); Oct24 $0.6450(A$1.5bln)
- NZD/USD: Oct22 $0.5700(N$1.1bln)
- USD/CAD: Oct22 C$1.3800($1.9bln), C$1.4200($1.1bln)
AUD: Trades at Daily Highs as Wires Confirm Minerals Deal
Wires confirm the signature of a minerals deal made between Australia and the US. AUD already trading at highs headed into the Trump-Albanese meet - and AUKUS and other military-tied deals are certainly under discussion. These AUD headlines look positive on initial read - but it's the China demand side for AUD that should prove more impactful:
On AUDNZD, we write:
- The Q3 CPI data from New Zealand is unlikely to derail the RBNZ's easing plans, but markets should be wary of the view that further NZ cuts mean AUDNZD will resume the uptrend.
- Headline inflation rose 1% on the quarter, bringing annual inflation to 3.0% y/y from 2.7%. While this marked the top of the RBNZ’s target band, there had been fears that it could go above - and the November 26th is already well priced for another 25bps (or more) of cuts.
- Instead, slower progress for AUD could contain the cross into year-end. Despite Trump's optimism, the path for easier US-China trade (or World-China) trade is clearly more fractured than previously, which works against the path of least resistance being AUDNZD higher. Similarly, China's soft investment data overnight signals Beijing may look through near-term econ weakness to gain the upper hand in trade terms over a longer time horizon.
- Société Générale write today that "despite excellent fundamentals, AUD may go on struggling as long as China is locked in dispute with the US and facing chronically weak domestic demand."
US: Trump Talks On China Tariffs, Critical Minerals, AUKUS & Ukraine
Speaking at a bilateral meeting with Australian PM Anthony Albanese, US President Donald Trump confirms that he intends to meet Chinese President Xi Jinping in South Korea during the Asia Pacific Economic Cooperation annual summit at the end of the month. Trump claims that "China has been respectful of [the] US", but the potential 155% tariffs come in on 1 November unless a deal is agreed. Trump: "We'll see what we can do..We expect to get a fair deal". Says "I think we'll end up with a strong trade deal with China ...."
- Regarding his talks with Albanese, Trump says the two will discuss trade, submarines, military equipment and critical minerals/rare earths. Says the two countries will sign an agreement on the latter, and that the US is "also working with other countries" on rare earths in the wake of China's imposition of stricter export controls.
- While Trump says the process of Australia purchasing US subs under the AUKUS agreement is "moving along rapidly", the Secretary of the Navy John Phelan says the US is looking to "clarify ambiguity". Adds, "We're looking at the Aukus relationship and making it better for all three". This will be viewed as the US attempting to rework the agreement after the fact in an effort to draw greater funding from Australia and/or the UK.
- Trump on the war in Ukraine, says "I think we'll get there", referring to an eventual peace agreement. In a downbeat assessment for Kyiv and Europe, Trump says "Ukraine could still win it [the war]. I don't think they will...Anything could happen."
