We expect the Riksbank to lower the short end of the rate path, indicating that a hike will not come until next year. EUR/SEK has on average climbed eight figures open/close when the rate path was lowered (apart from December 2018 when the lower path was accompanied by a hike). On average EUR/SEK has dropped two figures open/close when the path was left unchanged. See Chart 1.
The average intra-day high/low on a lower rate path day has been 15 figures. Unchanged path intra-day high/low is 8.5 figures. See Chart 2.
The options market is currently pricing a 7.5 figure move for tomorrow and Riba contracts indicate an 8bp hike for December. Hence, if we are right, we might be in for some action.
However, our ‘every second meeting rule’ points to an unchanged rate path, see Table 1.
See FX Trading Portfolio: Buy EUR/SEK on dovish Riksbank, 21 October, for our view.