EUR: Firmer Risk Backdrop/Data Offer Fleeting EUR Relief

Of note:

USDJPY 3.3bn at 161.00/161.50.

EURUSD 1.75bn at 1.1300 (thu).

EURUSD 1.49bn at 1.1400 (fri).

AUDUSD 1bn at 0.6875/0.6900 (fri).

USDJPY 2.04bn at 161.50 (mon).

• EURUSD: 1.1350 (500mln), 1.1400 (750mln).
• USDJPY: 161.00 (655mln), 161.20 (887mln), 161.25 (708mln), 161.50 (1.05bn).
• NZDUSD: 0.5675 (427mln).
• USDCNY: 6.8200 (1.1bn).

More Basis trades this Morning, suggested Cash buyers.

• IKU6 1.78k at 118.98.
• OATU6 ~1.2k at 119.84.

The Riksbank’s June minutes broadly confirmed the messaging from the decision itself. The reaction in SEK FX and rates has been contained as a result. The modest upward revision to the rate path reflected an increase in the right tail of the expected inflation distribution, owing to 3.5-months of Strait of Hormuz disruption.  

However, the tone from several members was that the MOU (even if deemed to be fragile) reinforces the case to remain on hold for now. Hjelm remains the most dovish member of the Board, while Jansson also stressed that he doesn’t place much weight on the idea of insurance hikes. Bunge appears content with the policy setting as is, and while Seim and Thedeen remain concerned about broader (i.e. global) inflation pressures, they still don’t seem to be arguing for a hike to be delivered in the near-term. For Seim, this is a moderation of her previous stance.

One sentence summary of the other main themes from the minutes:

• MOU: Members tried not to take too much optimism from the news at the time, though some noted that it could reduce tails risks.
• Inflation: Vigilance around upside risks stressed, but current conditions remain subdued. Thedeen (and to a lesser extent Bunge) noted that a weaker krona could add additional upward pressure. Only Seim remains clearly concerned about persistent upside risks for now though.
• Growth: A positive outlook remains, even if recent domestic growth indicators were weaker than expected