FxWirePro: Norwegian krone’s upper hand than Swedish krona among Scandis FX space – Activate longs in NOK/SEK optionality via seagull

Norges Bank raised its daily NOK purchases from February to March with lower expected petroleum revenues this year the reason behind this. While no immediate trigger for NOK appreciation, it is another argument in that direction.

Whereas SEK is the weakest major currency so far in 2019 (-5%, worse even than ARS at -4.8%), which is fortunate as we’ve been short in either cash or options vs NOK for most of the year. SEK’s negative yields continue to make it a choice funding currency, and domestic economic disappointments remain deeply negative reflecting Sweden’s exposure to lackluster continental growth (the Sweden EASI is -62, the second-worst of any major economy). 

The outlook for SEK was further hampered this week by inflation that undershoots the Riksbank’s forecast by a sizeable 0.4%, just a week after the central bank ended its intervention policy. The data need not preclude a hike later this year (the Riksbank hiked in December even though inflation had missed by 0.3%), but it does though increase the risk that the next hike is delayed beyond September. NOK, by contrast, remains relatively stable against the euro and we are comfortable owning NOK vs SEK for the time being as we expect the Norges bank to deliver on its guidance of a hike in March. 

Long a 2m 1.0780-1.1000 NOKSEK call spread, short a 1.0550 NOKSEK put. Paid 10bp February 1. Marked at 0.80%. Courtesy: JPM

Currency Strength Index: FxWirePro's hourly AUD spot index is inching towards -105 levels (which is bearish), while hourly USD spot index was at 57 (bullish) while articulating (at 07:32 GMT). 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex