EUR/SEK Response To Riksbank Rate-Path Decision

  • 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.

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