The surprise decision by the Riksbank to raise rates by a total of 100 basis points initially pushed the Swedish krona higher against the euro, but failed to sustain these gains. This supposes a worrying signal for Norges Bank (Bank of Norway)which is expected to announce a rate hike tomorrow, and a disturbing precedent for the Bank of Japan, the Swiss National Bank and the Bank of Englandwhich is also expected to make monetary policy announcements tomorrow, economists at rabbank.
USD/JPY will head towards 1.47 in the coming months
“The latest escalation of rhetoric from Russian President Vladimir Putin suggests the Swedish Krona is likely to be on the downside in the near term, regardless of yesterday’s 100 basis point rate hike.”
“The market expects Norges Bank to announce a 50 basis point rate hike tomorrow. In the current environment, we expect a 50 basis point move to have little near-term impact on Norwegian krone support. Against a backdrop of little liquidity for the Norwegian krone, many investors are likely to stay on the sidelines.”
“On the SNB, the market is expecting a 75 basis point rate hike tomorrow, which will likely bolster the CHF’s safe haven credentials.”
“Sterling is less likely to be helped by an aggressive rate hike tomorrow. Given the UK’s record current account deficit, we view Pound is very vulnerable and we see risk of GBP/USD falling to 1.08 six months ahead and EUR/GBP rising in this time frame.”
“The Bank of Japan is the most prominent insofar as it is expected to keep monetary policy loose tomorrow and until it sees further progress in domestic wage inflation. We see the risk that the USD/JPY heading to 1.47 in the coming months“.
Source: Fx Street
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