SEK, NOK Brace for CPI Data, Brexit and European Political Peril


NORDIC FX, NOK, SEK WEEKLY OUTLOOK

  • NOK, SEK eye CPI data as global economy slows
  • European political peril unnerving Nordic traders
  • US-China trade war risks appear to be escalating

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SWEDEN CPI DATA, FINANCIAL RISKS

The Swedish Krona and Norwegian Krone will be closely watching local inflation data and price growth out of key global economies – namely China and the US. In Sweden, the high-profile Prospera inflation expectations survey will be published. The Riksbank has repeatedly expressed frustration with CPI remaining stubbornly below target while local and European growth sputters as part of a broader global slowdown.

Here are a couple of other key Swedish event risks to monitor:

June 10: SEB Swedish Housing-Price Indicator, Household Consumption

June 12: Prospera Inflation Expectations Survey, Riksbank Deputy Governor Martin Floden Speaks

June 13: Average House Prices

June 14: CPI, CPIF Data

Housing and consumption data will become more important event risk to watch out for because of Sweden’s growing household debt. Ultra-low rates have incentivized Swedes to take on a substantial amount of debt, and policymakers may begin to sound the alarm that the Nordic financial system may be prone to a massive shock if global growth continues to wane and credit conditions tighten.

Chart Showing Sweden Household Debt

A full report on Sweden’s financial stability and the outlook for the Swedish Krona will be published in the coming weeks. To stay up to date on Nordic-related market moves, be sure to follow me on Twitter @ZabelinDimitri.

In Norway, local CPI data will likely be the primary catalyst behind Norwegian Krone price action on June 11, though the economic docket throughout the week remains broadly sparse. NOK may therefore be at the mercy of external shocks to sentiment, particularly those that affect crude oil prices. This in large part has to do with the Norwegian economy’s dependence on healthy global – and particularly European – demand for petroleum-based products.

VOLATILITY OUT OF EUROPE: ITALY PENALTY, BREXIT, MARIO DRAGHI SPEECH

In Europe, the political landscape is continuing to grow as a formidable force in regional markets – and ever increasingly global. The race for Prime Minister Theresa May’s position will commence on June 14, with expectations that Sterling’s price movement will largely be dictated by each candidate’s performance in the polls. That, and by BoE Governor Mark Carney’s speech – also on June 14 among other Brexit-related news.

In Italy – arguably the second-biggest political risk in Europe – local politicians will be biting their nails as Euro Area Finance Ministers meet on June 13 to discuss opening up a procedure to penalize Italy for its budgetary ambitions. Right-wing-populist Deputy Governor Matteo Salvini’s attempts to justify the country’s fiscal exceptionalismhas once again become a thorn in the side of the EU and European Commission.

ITALIAN 10-YEAR BOND YIELDS REMAIN ABOVE SIX-YEAR HIGH

Chart Showing Spread on Italian and German Bond Yields

On June 12, ECB President Mario Draghi and IMF Managing Director Christine Lagarde will be speaking at a conference in Frankfurt, Germany. Policymakers will may express concern about European growth prospects and the risks of political fragmentation, especially in light of the recent EU-wide parliamentary elections. SEK traders will be closely eyeing commentary because of the strong reliance Sweden has on European demand.

US CPI, RETAIL SALES, SENTIMENT INDICATORS

In the US, CPI data, retail sales and the University of Michigan’s sentiment survey will be heavily-eyed event risks that warrant the attention of global traders. If the publications underwhelm, it could prompt a selloff in the US Dollar if investors believe that this will increase the likelihood of a sooner-than-expected rate cut from the Fed. Conversely, local equities may jump on the prospect of cheaper credit.

CHINA CPI, TRADE WAR RISKS: WHAT CAN BEIJING USE AGAINST THE US?

On June 12, Chinese CPI data will be published, followed by a report on industrial production on June 14. Roughly one third of all Swedish exports to Asia go to China, and the latter’s position as a critical node in a global network makes its economic performance broadly a concern for everyone. The US-China trade spat continues to be a fundamental headwind that is persistently blowing the sales of the global economy increasingly closer to a rocky coastline.

On June 7, PBOC policymakers stated that China has many policy measures it can implement if relations between Beijing and Washington worsen. Some of these might include wrapping US businesses in more red tape and restricting or severely limiting the amount of rare earth metal exports. The latter has drawn a lot of attention and raised concerns that higher input costs may further weigh on global growth.

The export-driven Norwegian Krone and Swedish Krona are at the mercy of changes in sentiment because of the underlying dependence Nordic economies have on healthy world demand. Monitoring these developments is therefore crucial in order to ensure a balanced and well-informed trading strategy for Nordic-based assets.

SWEDISH KRONA, NORWEGIAN KRONE TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter



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