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25 Feb 2015
Riksbank to “sucker punch” investors - MP
FXStreet (Barcelona) - With markets pricing in another rate cut by the Riksbank to -0.2% for April and an extension to the bond buying program, Dean Popplewell, Director of Currency Analysis at MarketPulse, warns that investors should be mindful of the Central Banks wishes in this 'post-SNB' age.
Key Quotes
“In today’s new age, investors do not have the risk appetite to take on Central Bankers. This is evident in EUR/CHF, where traders are going along with the SNB, and the retreat of EUR/DKK after threatened capital controls. Central Bankers are certainly focusing intently on their own currencies, almost a covert currency war and Sweden’s Riksbank is no different.”
“Swedish policy makers seem fixated on EUR/SEK (€9.4748). Their currency trades just below the low seen on the day the CB announced its most recent dramatic policy changes (February 12).”
“Minutes from the Riksbank’s latest policy meeting this morning confirms concerns about inflation being too low and that the board members “will do whatever it takes to get inflation expectations up rapidly”.”
“Earlier this month, policy makers cut interest rates to -0.1% from zero and launched QE (SEK10b).”
“The market is now beginning to price in a further rate cut to -0.2% for April and an extension of the bond buying program to quarterly. Their argument only gets stronger if the SEK strengthens further or oil prices continue to drop.”
“It’s not a forgone conclusion that the Riksbank will be aggressive, but investors should be mindful of the Central Banks wishes. No Central Banker in this environment will let its own currency get too far ahead of itself in either direction!”
Key Quotes
“In today’s new age, investors do not have the risk appetite to take on Central Bankers. This is evident in EUR/CHF, where traders are going along with the SNB, and the retreat of EUR/DKK after threatened capital controls. Central Bankers are certainly focusing intently on their own currencies, almost a covert currency war and Sweden’s Riksbank is no different.”
“Swedish policy makers seem fixated on EUR/SEK (€9.4748). Their currency trades just below the low seen on the day the CB announced its most recent dramatic policy changes (February 12).”
“Minutes from the Riksbank’s latest policy meeting this morning confirms concerns about inflation being too low and that the board members “will do whatever it takes to get inflation expectations up rapidly”.”
“Earlier this month, policy makers cut interest rates to -0.1% from zero and launched QE (SEK10b).”
“The market is now beginning to price in a further rate cut to -0.2% for April and an extension of the bond buying program to quarterly. Their argument only gets stronger if the SEK strengthens further or oil prices continue to drop.”
“It’s not a forgone conclusion that the Riksbank will be aggressive, but investors should be mindful of the Central Banks wishes. No Central Banker in this environment will let its own currency get too far ahead of itself in either direction!”