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Aug 29, 2014
SEK: Let battle commence – HSBC
FXStreet (Guatemala) - Analysts at HSBC explained that the Riksbank has a battle on its hands to get inflation higher, but so does the ECB.
Key Quotes:
“ECB President Mario Draghi's Jackson Hole speech has upped the ante, signalling a greater appetite for additional easing as Eurozone inflation expectations slip lower”.
“Lower interest rates and asset purchases look increasingly likely, and the EUR has weakened accordingly. The Riksbank cannot afford to stand still in the face of ECB activism. Sweden's central bankers point to a "catalogue" of policy options should further easing be required”.
“But with rates near the zero bound, credit easing problematic given concerns over rising household debt, and quantitative easing constrained by a comparatively small government bond market, the prospective scale of monetary loosening has its limits”.
“As a result, in the fight to get inflation higher, SEK strength must be avoided at all costs. Imposing a currency floor has been downplayed in comments from the Riksbank, but with the ECB successfully pushing the EUR lower, this reticence may quickly fade”.
Key Quotes:
“ECB President Mario Draghi's Jackson Hole speech has upped the ante, signalling a greater appetite for additional easing as Eurozone inflation expectations slip lower”.
“Lower interest rates and asset purchases look increasingly likely, and the EUR has weakened accordingly. The Riksbank cannot afford to stand still in the face of ECB activism. Sweden's central bankers point to a "catalogue" of policy options should further easing be required”.
“But with rates near the zero bound, credit easing problematic given concerns over rising household debt, and quantitative easing constrained by a comparatively small government bond market, the prospective scale of monetary loosening has its limits”.
“As a result, in the fight to get inflation higher, SEK strength must be avoided at all costs. Imposing a currency floor has been downplayed in comments from the Riksbank, but with the ECB successfully pushing the EUR lower, this reticence may quickly fade”.