FxWirePro: Snippets of EMEA and Scandis FX portfolio

European central bank is lined up for the monetary policy meeting this week, following the ECB’s surprisingly dovish message last week, signaling no hikes in 2019. The ECB strikes a dovish tone at its governing council meeting on April 10. The ECB may, after its surprise TLTRO III announcement on March 7, follow through with a tiered deposit rate to help banks cope with the weak Eurozone economy.

While NOK and SEK are also affected by the weak eurozone economy, despite the fact that the two economies developed quite robustly recently so that the central banks have been sticking to their normalization plans for now. 

However, the market does not seem to believe that Norges Bank or Riksbank will be able to move independently of the more cautious ECB. As a result, SEK and NOK also come under pressure whenever the outlook for the euro zone deteriorates. However, we are a little more positive than the market and do not currently assume that economic growth in Sweden or Norway will weaken massively so that the two central banks might actually maintain their slightly more optimistic approach. 

We now quickly run you through the EMEA FX GBI-EM Model portfolio. Medium weights in the region holding OW PLN vs UW CZK after moving MW RON (from UW) are advised. While we activate a bullish USDZAR put spread for a potential China/global growth stabilization.

USDSEK vs EURSEK vol spreads are a well-priced, positive carry expression of a constructive stance on European FX vol. Courtesy: JPM & Commerzbank

Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 10 levels (which is mildly bullish), while hourly USD spot index was at -46 (bearish) while articulating (at 13:13 GMT). 

For more details on the index, please refer below weblink:

  • Market Data

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