Politics keeps SEK under pressure – Danske Bank

Chief Analyst at Danske Bank Jens Pedersen assessed the political scenario in Sweden and the prospects for the Krona.

Key Quotes

“In Sweden, the centre-right government proposed by Ulf Kristersson was, as expected, voted down in yesterday’s Riksdag session”.

“According to the Speaker, the next step is to once again meet and discuss with all party leaders, which is due to happen today, after which he sees two options: either he directly proposes Stefan Löfven as the new PM, which would be followed by a new vote in the Riksdag, or he gives Annie Lööf a mandate to probe the possibilities of a government formation. Whatever option the Speaker ends up going along with, we still believe the process will drag out for quite some time and with it the political risk premium in the krona”.

“Yesterday, the SEK took a hit after lower-thanexpected inflation data. However, seeing as the outcome was only one-tenth below the Riksbank’s CPIF forecast and still above target, we are confident in our call for a first hike in December”.