SEK: Important EURSEK Support Zone Coming Back Into View
EURSEK has traded in a sideways fashion since the start of September, but building downward momentum is helping narrow the gap to an important support zone around 10.9000. A clear break of this level would expose 10.8000, which aligns closely with the April 4 low (10.7941).
- The case for continued SEK outperformance is largely tied to the growth differential channel. Recent domestic data have supported these arguments, with Swedish activity being supported by stimulative monetary policy, incoming fiscal stimulus and lower trade policy uncertainty.
- Current Bloomberg consensus sees EURSEK at ~10.90 by year-end, before falling to 10.70 by the end of next year.
- EURSEK is down 0.3% intraday, seemingly a function of the 1% rally in European equity futures.
- Swedish final October inflation is due tomorrow. The flash reading was 2.8% Y/Y (2.76% unrounded), two tenths above Riksbank and consensus projections. However, the final reading details are unlikely to be a gamechanger for markets, with policymaker guidance clear that the policy rate is likely to remain at 1.75% for "some time to come".
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OUTLOOK: Price Signal Summary - Recovery In Gilts Extends
- In the FI space, Bund futures rallied sharply higher on Friday confirming a resumption of the recovery that started Sep 25. The move higher reinforces a bullish theme and attention is on the next key resistance at 129.44, the Sep 10 high. Clearance of this hurdle would pave the way for a climb towards 129.58, 61.8% of the Jun 13 - Sep 3 bear leg. Initial support to watch lies at 128.64, the 50-day EMA. A break of this level would instead signal a reversal.
- Gilt futures rallied sharply higher on Friday confirming a resumption of the recovery that started Sep 25. The move higher reinforces a bullish theme and attention is on the next key resistance at 91.28, the Sep 24 high. It has been pierced, a continuation higher would pave the way for an extension towards key resistance at 91.82, the Sep 11 high. On the downside, price needs to trade below support at 90.26, the Sep 26 low, to reinstate a bearish theme. First support lies at 90.86, the 20-day EMA.
BOE: Headline From Greene Not Surprising Thus Far
Comments crossing from BOE's Greene, who is speaking at a Society of Professional Economists event. Thus far, not much too surprising. A reminder that Greene wrote an OpEd in the FT last week, where she flagged the idea of skipping a rate cut (in line with her recent comments and not a surprise at all).
"*BOE'S GREENE: ACTIVITY STRONGER THAN THOUGHT A YEAR AGO" Bloomberg
"*BOE'S GREENE: INFLATION AND WAGE GROWTH STRONGER TOO" Bloomberg
"*BOE'S GREENE: CONCERNED DISINFLATION PROCESS SLOWING" Bloomberg
TARIFFS: Headlines From Tsy Sec Bessent On China
- "*BESSENT: OPTIMISTIC THAT CAN DE-ESCALATE WITH CHINA" Bloomberg
- "U.S. TREASURY SECRETARY BESSENT ON CHINA TRADE: WE HAVE AGGRESSIVELY PUSHED BACK AGAINST CHINA'S EXPORT CONTROLS -FOX BUSINESS INTERVIEW" Reuters
- "BESSENT ON CHINA TRADE: THIS WAS A PROVOCATIVE MOVE" Reuters
- "BESSENT ON CHINA TRADE: SUBSTANTIAL COMMUNICATION OVER WEEKEND" Reuters
- "BESSENT ON CHINA TRADE: WILLBE LOTS OF STAFF LEVEL MEETINGS" Reuters
