Sweden’s central bank is due to deliver its latest monetary policy decision on Wednesday.
Most analysts expect the Riksbank to keep its main repo rate unchanged at minus 50 basis points and not alter its 30bn krona asset purchase programme, or QE.
But HSBC thinks desire for the Riksbank to tighten policy is building.
“Three members of the committee dissented against the [QE] extension in December, while the tone in speeches and publications from the central bank has shifted to the merits of inflation targeting and whether the central bank could adjust its policy stance in the coming months,” says HSBC.
“We look for further indication of these moves at this meeting,” it adds.
RBC Capital Markets, on the other hand, thinks this more hawkish tone is already baked into recent Swedish krona trading.
“Although we have little in the way of hard data on positioning, bullish SEK seems to be a very consensus view this year and the price action is certainly consistent with that, EUR/SEK hitting a three-month low earlier this month,” says RBC.
The risk for the krona is that the central bank is not deemed hawkish enough and there may then be a “scramble to cover EUR/SEK shorts”; in other words, krona bulls may be disappointed.
RBC said at the start of the week it went long the euro versus the krona at 9.4795 and has a target of 9.6700 for a short-term trade
It has placed a stop loss at 9.3900.
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