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SEK: Liquidity tailwinds in Q1 – Nordea Markets

According to the analysts at Nordea Markets, the Riksbank's new forecast for the trade-weighted SEK (KIX index) is consistent with EURSEK above 10.00 until 2020.

Key Quotes

If the Riksbank’s expansion of its balance sheet this year was an important driver of SEK weakness, the end of this expansion should be SEK-positive. The ~23bn maturity of the SGB1051 in the summer of 2017 was preceded by a move lower in EUR/SEK, and the SGB1052 maturity in March 2019 is more than twice as large. Moreover, the liquidity surge ahead of the US debt limit may also be good news for the SEK, as Stibor should climb. In short, we expect liquidity tailwinds for the SEK in Q1 (if the USD dumps in 2019 this could add tailwinds for the SEK.”

A risk for the SEK for the later parts of 2019 is thus if the Riksbank decides to grow its balance sheet again, and this at an even quicker pace than in 2018. In short, the liquidity tailwinds for the SEK in Q1 could turn into headwinds in H2, should Riksbank decide to fully pre-reinvest the 2020 maturity.”

 

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