SEK, NOK, CHF: Activity data as central banks await the ECB

The outlook for the smaller European currencies (SEK, NOK and CHF) will ultimately depend on ECB policy this week. In Sweden, imminent ECB easing will likely cause the Riksbank to cut its repo rate by 10bp, with risks for a deeper cut should the ECB exceed market expectations. Even though market pricing for the Riksbank's December meeting has moved appropriately, the near-term risks seen for EURSEK skewed mildly to the upside. Following the upside surprise in Q2 GDP, expectations are for a milder but still solid 0.4% q/q growth (Monday, 3.4% wda y/y) and a further increase in manufacturing PMI (Tuesday) to 54 (previous 53.5).

In Norway, manufacturing PMI data (Tuesday), the Norges' Regional Survey of future growth (Friday) and OPEC's meeting (Friday), to the extent to which it has an impact on oil prices, will be the key drivers for the NOK. Importantly, the Regional survey (6m future growth) is likely to further decline to 0.0 from 0.06, confirming an otherwise vulnerable growth outlook. 

"We continue to see EURNOK at current levels by year-end but a weak regional network report is likely to skew expectations for an earlier rate cut, weighing on the NOK", notes Barclays.

In Switzerland, otherwise import data such as the KOF leading growth indicator (Monday), GDP (Tuesday) and CPI inflation (Friday), will only be of second importance despite expectations for a stabilisation in inflation and growth (-1.3% y/y from -1.4% y/y and 0.2% q/q from 0.2% q/q, respectively). Instead, the CHF will likely trade heavily ahead of the ECB meeting. Recent ECB rhetoric has significantly raised market expectations for additional SNB stimulus, causing CHF depreciation. The SNB will not pre-empt the ECB but respond at its December meeting with its "nuclear" option, removing all exemptions on sight deposits, causing material CHF depreciation. 

"We see EURCHF higher post the SNB meeting and expect the SNB to actively intervene post ECB should EURCHF depreciate. We remain long USDCHF spot and look for material further upside", added Barclays.