FX Daily: Hawkish wave to hit Scandinavia today
At a Glance
The outlook for Scandinavia's monetary policy takes a hawkish turn as the Riksbank is expected to signal an imminent rate hike, potentially aligning with the desk's anticipation of a November adjustment. Per the full note from ING, this hawkish hold reflects a broader trend amidst a strengthening dollar and rising oil prices, which have shifted market sentiment toward tighter monetary conditions across the region. Current positioning indicates that the NOK has greater upside potential than the SEK due to diverging expectations regarding the Norges Bank, creating a tactical opportunity in the cross-rates. Additionally, the backdrop of a depreciated dollar rally appears stretched, suggesting potential volatility in the USD/JPY pair should Japanese authorities intervene in exchange markets.
Key Takeaways
- 01Expect the Riksbank to signal a rate hike in November amid a hawkish shift in regional monetary policy.
- 02NOK offers greater upside potential compared to SEK due to market divergences regarding Norges Bank's decisions.
- 03The USD rally is showing signs of strain, particularly with rapid movements in USD/JPY prompting potential intervention.
- 04Market volatility may increase as traders anticipate reactions from both Scandinavian and central bank authorities.
Full Analysis
What the desk is arguing
The desk contends that the Riksbank's anticipated hawkish stance will bolster the SEK in the near term. This expectation comes as signs of economic strength are evident, with the USD rally looking oversold against fundamental reports. According to the source note, the Riksbank's rate hike, projected for next month, coupled with an anticipated rate decision from Norway, could lead to significant shifts in regional currencies.
Key indicators supporting this view include the recent rise in DXY above 101.0, bolstered by strong US PMIs, while the potential for intervention from the Bank of Japan at levels over 160.0 in USD/JPY creates a complex backdrop for dollar positioning.
Where it sits in our coverage
For the EUR/USD pair, our current consensus target stands at 1.1684, with median forecasts ranging from 1.1200 to 1.2000 by December 2026, according to firms like socgen (1.1400), rbc (1.2000), and morganstanley (1.2150).
This desk's view of a hawkish adjustment in Scandinavian currencies diverges from current forecasts, particularly with expectations for the SEK to strengthen, as it lies towards the upper range of the spread among forecasts.
How other firms see it
Several firms, including ing, socgen, and rbc, align with the Riksbank's hawkish signal, reflecting a consensus towards anticipated rate hikes. However, mizuho and goldman provide contrasting forecasts that position the SEK and NOK less aggressively against major currencies.
The anticipated Riksbank rate path aligns with other central banks' tightening measures, including movements from the Fed and potential shifts in USD/JPY based on Japanese monetary policy, which remains a key market watchpoint.
Market Implications
Monitoring USD/JPY is crucial, especially with the potential for intervention around the 160.0 mark. Additionally, traders should pay attention to any shifts in Riksbank communications as they could signal further SEK appreciation in response to regional inflation pressures.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
MUFG | Bullish | 1.1800 |
Danske Bank | Bearish | 1.1100 |
UBS | Bullish | 1.1800 |
From the original
Articles FX Daily: Hawkish wave to hit Scandinavia today Published 07:50 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download We expect the Riksbank to deliver a hawkish hold, hinting at an imminent rate hike, which we expect in November. In Norway, we
Related speeches
4 itemsGlobal Rates: Scandi Rates Outlook
The desk asserts that the recent developments in the rates markets of Sweden and Norway suggest a tightening in monetary policy is imminent, potentially affecting the Swedish Krona (SEK) and Norwegian Krone (NOK) exchange dynamics. Per the full note from J.P. Morgan, Khagendra Gupta and Frida Infante highlight that inflationary pressures are influencing rate expectations, which could pivot central bank strategies. As inflation continues to persist above target levels—averaging around 3.5% in Sweden—the likelihood of rate hikes in 2026 grows stronger, reinforcing a bullish outlook for SEK against major currencies, particularly the EUR. In absence of high-impact events in the next month, market positioning will likely revolve around speculative changes based on rate expectations.
Riksbank preview: Hold now, hike in November
The desk anticipates that the Riksbank will opt for a hawkish hold at its upcoming meeting, indicating a likely hike in November. Per the full note [source], while there is a possibility of a surprise hike on September 24, the Riksbank's current stance reflects its cautious approach to inflation dynamics and external market pressures. The expectation builds on signals of rising inflation due to energy price increases and a weaker krona, reinforcing the view that tightening is on the horizon in the coming months, possibly at the November or December meetings.