SWITZERLAND: US Off-Switzerland Refused To Make Concessions On Trade Barriers

The dovish June 18 Riksbank decision has been followed by a string of weak domestic data. Since June 23, the 2-year SEK swap rate has fallen 17bps, and markets now assign a ~50% implied probability of another rate cut as soon as August (up from ~25% a week ago, according to latest estimates from SEB). As such, the Swedish krona has underperformed the G10 basket over the past week.

• EURSEK is up another 0.25% today, hovering just below clustered resistance at the 200 DMA (11.2319) and April 11 high (11.2384). Beyond these levels, resistance is seen at 11.3203 (76.4% retrace of the Feb 3 to Apr 3 selloff).
• On the other hand, USDSEK remains close to multi-year lows amid the broader dollar-negative environment. The 50-day EMA at 9.6544 presents initial resistance.
• Data since the Riksbank’s June decision has included a weak Economic Tendency Survey (which had the hallmarks of the Riksbank’s June MPR “dovish” alternative scenario) and the weakest monthly retail sales print in 30 years. Meanwhile, the June manufacturing PMI eased a little to 51.9 (vs 53.1 prior). The services PMI is due tomorrow, with June flash inflation set to cross next Monday.
• We wrote earlier today that Scandinavian currencies have historically outperformed in July. From a more medium-term perspective, JP Morgan write that “SEK, and to a lesser extent NOK, have benefitted and can do so further from their large US equity holdings via either (1) increased FX hedging of USD exposure, (2) a rotation from US to RoW equities, or (3) outright sales and repatriation in equity drawdowns”.
• However, near-term risks may still be tilted towards further SEK weakness, given the Riksbank’s comfort with cutting further if justified by the data.  

• RES 4: 93.76 High Jul 1 and key resistance   
• RES 3: 93.41 Intraday high      
• RES 2: 92.78 20-day EMA
• RES 1: 92.25 Low Jun 23  
• PRICE: 91.84 @ 14:19 BST Jul 2 
• SUP 1: 91.74 Intraday lows  
• SUP 2: 91.50 61.8% retracement of the May 22 - Jul 1 bull leg 
• SUP 3: 91.16 Low Feb 2     
• SUP 4: 90.97 76.4% retracement of the May 22 - Jul 1 bull leg       

Gilt futures have faced strong selling pressure today. The move down has cancelled a recent bullish theme - price has breached the 20-day EMA and traded through a key support at 92.23, the Jun 16 low. The break lower suggests potential for an extension towards 91.50 next, a Fibonacci retracement. On the upside, initial resistance to watch is 92.78, the 20-day EMA.

SPX: 6,200.8 (+0.0%); DJIA: 44,503 (+0.0%/+8pts); NDX: 22,464.1 (-0.1%).