CHILE: USDCLP Bear Theme Remains Intact, President Boric in Italy Today

SEK outperforms the G10 basket, supported by solid European equity performance and broad-based dollar weakness. There may also be some spillover from Governor Thedeen’s recent interview with Dagens Industri, which cements next week’s Riksbank decision as a very close call between a cut and a hold. 

• USDSEK is down 0.5% at 9.2760. Technical conditions are bearish, with the pair narrowing the gap to the next key support at 9.2307 (March 2022 low). Clearance of this level would expose the psychological 9.0000 handle. EURSEK meanwhile has pierced the September 10 low of 10.9126.
• JP Morgan remain bullish on SEK as they “expect fiscal to continue to be an FX differentiator going forward and yield compression to continue to benefit high beta low-and and mid-yielders“.
• Over the weekend, Riksbank Governor Thedeen gave a rare interview to domestic press. Speaking to Dagens Industri, he said that the current rate decision is very close to call. While he noted that the August inflation outcome confirms the Riksbank’s view that the summer uptick was likely temporary, he still called for vigilance. Additionally, he confirmed that the SEK80bln of measures proposed in the 2026 budget was above the SEK50-60bln included in the June MPR forecasts.
• The Government has just announced a SEK26.6bln rise in defence spending as part of its 2026 budget announcements. We assume this forms part of the SEK80bln earmarked for next year.
• Speaking on the krona directly, Thedeen noted that “I don't have an exact forecast for the krona going forward, but I would guess that it is still somewhat weak”

ECB Schnabel's slides presented at the EIB's Chief Economist's meeting are here

Key messages are well in line with Schnabel's previous comments:

• "Interest rates are in a good place as inflation stabilises around our 2% target and the economy remains resilient at full employment"
• "Healthy balance sheets, lower uncertainty and fiscal expansion underpin domestic demand, counteracting a decline in net exports"
• "So far little evidence of China dumping exports, while the pass-through of a stronger exchange rate is likely to be limited"
• "Upside risks to inflation dominate, with tariffs, services inflation, food inflation and fiscal policy as potential drivers"
• "Monetary policy should keep a steady hand, tolerating moderate deviations from target"

• Bullish conditions for GBPUSD have been bolstered this morning, following the break of the bull trigger located at 1.3595 (Aug 14 high) which places the pair at two-month highs. The rally that started Sep 3 has retraced the steep Sep 2 sell-off, suggesting the corrective cycle between Aug 14 - Sep 3 is over. Immediate resistance is found at 1.3636, the 76.4% retracement of the Jul 1 - Aug 1 downleg, before 1.3681, the Jul 4 high.
• ING comment that the travails of the UK Labour government have not dented appetites for the high-yielding pound. They think EURGBP looks comfortable in its 0.86-0.87 range, while GBPUSD could break above resistance at 1.3590/3600 this week if the Fed is sufficiently dovish.
• Official labour market data headlines Tuesday’s calendar, expected to continue to show mixed signals. 3m/3m employment is expected to increase by over 200k again in the 3-months to July while the flash monthly payrolls print is expected to modestly decline by around 11k in August.
• UK CPI data and the BOE decision also take place this week, placing a heightened amount of attention on sterling this week.