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Return of deflation to ring alarm bells at the SNB The confirmation this morning that Swiss inflation fell back into negative territory in October for the first time since November 2016 will reignite deflationary fears at the SNB and strengthen its …
1st November 2019
The Riksbank appears determined to raise interest rates into an economic slowdown. While higher policy rates may provide some support for the Swedish krona, we still think that it will continue to depreciate. To the surprise of most analysts, ourselves …
Rebound in sentiment still consistent with weak GDP growth October’s rise in the Swiss KOF Economic Barometer was not enough to offset the previous month’s drop and the series still suggests that activity will remain subdued into 2020. Given the …
30th October 2019
Riksbank gunning for zero at all costs As expected, the Norges Bank and the Riksbank both left their policy interest rates on hold on Thursday, at 1.50% and -0.25% respectively. (See here .) Nonetheless, the strong hint by the Riksbank that it will “most …
25th October 2019
Having left its repo rate on hold at -0.25% this morning, we do not doubt the Riksbank’s clear intent to raise it to zero in December. However, with economic growth set to slow in 2020, and underlying price pressures to stay subdued, we think that …
24th October 2019
While we think that there is still a bit more scope for the Norwegian krone to fall against the euro, we expect the currency to bounce back over the next couple of years, as the country’s terms of trade improve. For all the talk about krone weakness, its …
23rd October 2019
Riksbank and Norges Bank set to leave policy on hold this week. SNB to push the boundaries of policy easing in early 2020. Central bank of Iceland to continue its easing cycle over the coming months. We expect the Riksbank and the Norges Bank to leave …
22nd October 2019
The success of environmentalist parties in yesterday’s Federal Elections in Switzerland echoes similar gains elsewhere in Europe in recent months. But given Switzerland’s consensus-based political system, the result is unlikely to cause any major change …
21st October 2019
Statistics Sweden sound a health warning The news that the Swedish unemployment (UP) rate was unchanged at its highest level since June 2015 in September (7.4%) initially caused the krona to fall against the euro on Thursday morning. However, the currency …
18th October 2019
While the Swiss and Swedish economies appear to have contracted in Q3, mainland GDP growth in Norway is chugging along nicely. And even though activity is set to slow in 2020, Norway will remain a bright spot over the coming years. This comparatively …
17th October 2019
In keeping with our bearish view on the euro-zone, our forecasts for GDP growth in Switzerland and the Nordic economies over the coming years are generally well below consensus. Switzerland is most exposed to the industrial woes in Germany, and we expect …
16th October 2019
The decades-long downward trend in the Swedish krona means that a Nobel prize in US dollar terms is worth less than half what it was in the early 1990s. With the krona set to fall further by year-end, and unlikely to rise much over the medium term, …
14th October 2019
Swedish activity data flatter to deceive On the face of it, the stronger than expected activity data from Sweden for August released this week lend support to the Riksbank’s forecast that it will hike rates over the next six months or so. Production in …
11th October 2019
Underlying inflation to stay subdued in Sweden The persistent weakness of underlying inflation in Sweden serves as further proof, if needed, that the Riksbank will have to shift to a more dovish stance over the next six months or so. As a result, the …
10th October 2019
Calls for any fiscal stimulus to support the Swedish economy are likely to fall on deaf ears, so the burden will continue to be entirely on the Riksbank. A combination of a dovish shift by the Bank and a further escalation in global trade tensions will …
9th October 2019
What’s Swedish for ‘disastrous’? The plunge in Sweden’s manufacturing PMI in September, from 51.8 to just 46.3, was bad enough on its own. (See here .) But taken together with the sharp fall in the services PMI (data released yesterday), the overall …
4th October 2019
Having cut its key interest rate by 25bps this morning, we now expect the Central Bank of Iceland (CBI) to stay in easing mode over the coming months and to reduce rates to 2.75% by year-end. The reduction in the seven-day deposit interest rate in Iceland …
2nd October 2019
Another step towards deflation The further decline in Swiss inflation, to just 0.1% in September, will stoke deflationary fears at the SNB and will only strengthen its resolve to resist upward pressure on the franc. The headline Swiss inflation rate fell …
From bad to worse The release of a grim set of manufacturing PMIs for September this morning lends further support to our views that policymakers in Sweden and Switzerland will end up cutting interest rates deeper into negative territory, and that the …
1st October 2019
The latest business surveys from Switzerland indicate that the woes in Germany are posing an increasing drag on activity. We have therefore revised our forecasts for Swiss GDP growth down to just 0.5% this year and next, which puts us well below the …
30th September 2019
No signs of green shoots in the Swedish economy Another week, and yet more evidence that the Swedish economy is stuck in first gear. The Economic Tendency Indicator fell for the fifth month in a row in September (data released on Thursday), driven by a …
27th September 2019
Assessing investors’ expectations about the future path of policy interest rates in Norway is not as straightforward as it is in other countries, not least neighbouring Sweden. In this Update we answer ten key questions to provide a primer on how to gauge …
Most of the recent outperformance of Switzerland’s manufacturing sector relative to Germany’s reflects strong growth in pharmaceuticals. But this has masked struggles in more Germany-facing sectors. The Swiss manufacturing sector has outperformed its …
26th September 2019
Given that the SNB’s policy rate is already at -0.75%, fears of hitting the so-called ‘reversal rate’ are likely to make it unwilling to cut rates much further. With the ECB once again in easing mode, we put the odds of the SNB having to reinstate a …
25th September 2019
Lots of chatter from the Riksbank If a week is a long time in politics, two weeks is an eternity in Swedish economics! The clear deterioration in the economic data since the September policy meeting just a couple of weeks ago – not least the further rise …
20th September 2019
The changes to the SNB’s tiering system, announced yesterday, are even more generous to domestic banks than they initially appear, and will help to ‘sugar the pill’ ahead of a probable rate cut. The main point of interest at yesterday’s SNB meeting was a …
This morning’s decision by the Norges Bank to raise its key policy rate by 25bps, to 1.50%, was is in stark contrast to the rate cuts delivered by the Fed and the ECB over the past week. Nonetheless, given the dovish shift in the Bank’s tone, we agree …
19th September 2019
Given that the Swiss National Bank last changed its policy stance in January 2015, this morning’s decision to leave its policy rate on hold at -0.75% came as no surprise to us. But its tweak to make its tiering system more generous to banks lends further …
The sharp rise in Swedish unemployment in August serves as further evidence that the Riksbank is unlikely to be able to tighten policy later this year, as it forecasts. The increase in Sweden’s seasonally-adjusted unemployment rate in August, from 7.1% in …
17th September 2019
The ebbs and flows in investor risk appetite in recent months have resulted in a rollercoaster ride for the Swiss government bond market. The run-up in the price of Swiss 50-year government bonds between early-July and mid-August – which reflected a fall …
13th September 2019
Over to you, SNB! The recent pick-up in investor risk appetite has given the SNB a little breathing space ahead of its policy meeting next Thursday. Weekly data indicate that the Bank paused its FX interventions to weaken the franc at the end of August …
Having mirrored the ECB’s 10bp interest rate cut this afternoon, we now expect the Danish Nationalbank to reduce its Certificates of Deposit rate again by the end of the year. Meanwhile, although the SNB is likely to stick with FX interventions for a …
12th September 2019
Weak inflation further undermines the Riksbank’s hawkish stance The weakness of Swedish inflation in August pours even more cold water over the Riksbank’s forecasts for an interest rate hike over the next six months. We are sticking to our view that …
10th September 2019
The Riksbank is in a group of one It was no surprise to see the Riksbank present substantial downward revisions to the back-end of its forecast for the repo rate at its policy meeting on Thursday. However, the fact that the Bank stuck to its forecast of a …
6th September 2019
The decision by the Riksbank to leave its repo rate on hold at 0.25% this morning was never really in doubt. However, its hawkish tone and cautious approach to cutting its forecasts for the repo rate poses serious risks to its credibility. Given that all …
5th September 2019
Activity set to slow further in the second half of the year The fact that the Swiss economy grew slightly faster than we had expected in Q2 is of limited solace given the sizeable downward revisions to the back data. The risks to our GDP forecast this …
The fact that investors are now pricing in looser monetary policy in Sweden highlights the extent to which the Riksbank has fallen behind the curve. Anything less than a substantial dovish shift in the Bank’s tone and forecasts tomorrow would be a big …
4th September 2019
Persistent subdued inflation keeps the pressure on the SNB This morning’s release of Swiss inflation data for August confirmed that price pressures there remain almost entirely absent. It’s still a question of when, rather than whether, the SNB eases …
3rd September 2019
August PMIs are no game changers The manufacturing PMIs from August indicate that the Swiss industrial sector is still feeling the pinch from the deep downturn in its German counterpart and the stronger franc, and add to the evidence that the Swedish …
2nd September 2019
Dire Swedish data run goes On and On and On The fourth consecutive fall in the Swedish Economic Tendency Indicator continued the recent run of poor data releases. The indicator fell in August to its lowest level since June 2013 and the broad-based …
30th August 2019
GDP growth in Finland and Denmark set to slow in H2 Although today’s release of GDP data for Finland and Denmark shows that both economies grew solidly in Q2, we suspect that quarterly growth will slow in both in the coming quarters. Meanwhile, the Swiss …
Q2 GDP growth may be as good as it gets for Norway This morning’s release of Q2 GDP data from Norway confirms that the economy remains a bright spot in the Nordics. But given that oil prices are now in line with our end-year forecast of $60pb, we think …
29th August 2019
Given the deep downturn in the tourism sector, this morning’s decision by the Central Bank of Iceland (CBI) to cut interest rates by a further 25bps came as no surprise to us. We think that policymakers will continue the easing cycle at the next meeting, …
28th August 2019
NOK/EUR to fall to record low Markets are more “hawkish” than we are on rates in Norway – they expect rates to be raised by roughly 50bp by the end of this year while we expect the Bank to leave them unchanged. Meanwhile, investors appear to have priced …
23rd August 2019
While the Swedish krona and the Norwegian krone are now near the record lows they reached against the euro in 2008-09, we think that monetary policy and rising risk aversion will push them down further. The Swedish and Norwegian currencies have …
21st August 2019
The acquisition of reserve assets by the Swiss National Bank (SNB) has seen it take on a role more suited to fund managers than central bankers. Faced with the prospect of negative bond yields further and further along the curve, we think that …
While the imminent change in leadership at the Central Bank of Iceland (CBI) is unlikely to affect its current easing bias, the new Governor will have a bigger role in shaping policy than his predecessors. Having been named as the new Governor of the …
19th August 2019
SNB FX interventions are gathering pace Spare a thought for the poor FX team at the SNB: while much of Europe is away on holiday, data released on Monday showed that they recently had their busiest week of interventions since April 2017. It’s worth noting …
16th August 2019
The pick-up in FX interventions by the Swiss National Bank (SNB) in recent weeks is likely to be the first step towards a rate cut. But predicting when the interventions will be dialled down and the policy rate will be cut is more art than science. It’s …
15th August 2019
While this morning’s decision by the Norges Bank to leave its key policy rate unchanged at 1.25% was in line with expectations, the dovish shift in its tone suggests that the last bastion of hawkishness among advanced economies has fallen. In contrast to …
