.
Cc: Davide-A Sferrazza
Xavier Avila
Joshua Shoshan
Vahe Stepanian
Stewart Oldfield
Good morning Paul,
I know we can't trade options just yet, but we're looking at some bullish
SEK ideas this morning, thought I'd share with you based on George
Saravelos' research piece.
Here are some of our preferred bullish-SEK expressions in the Correlation
space.
Spot Refs: 1.1790, 8.0775, 1.3190
1) USDSEK Digital Puts w/ EURUSD DKO's
3m USDSEK 7.80 Digital Put w/ EURUSD DKO 1.14-1.22
6.5% offer
3m USDSEK 7.80 Digital Put w/ EURUSD DKO 1.13-1.23
9.3% offer
3m USDSEK 7.90 Digital Put w/ EURUSD DKO 1.14-1.22
11% offer
USDSEK 7.80 Digital outright would be 23% offered.
USDSEK 7.90 Digital outright would be 34.5% offered.
2) GBPUSD Lower, USDSEK Lower Dual Digitals
3m Dual Digital
GBPUSD < 1.30
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USDSEK < 7.90
6% offer
Individuals: 33%, 34.5%
3m Dual Digital
GBPUSD < 1.30
USDSEK < 8.0
8.75% offer
Individuals: 33%, 47.5%
And a full Dual Digital Grid ...
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[email protected]}
We are very bullish on the Swedish krona. To start with, Swedes have the
world's hottest property market. Comparative data updated by the OECD last
week show that Sweden has taken the pole position from New Zealand this
year, with Swedish real house prices now double their thirty-year average.
More significantly, unlike runners-up New Zealand, Australia and Norway,
Sweden has seen valuations rise far above pre-crisis peaks (Figures 1& 2).
The international comparison stresses the urgency for the Riksbank to
normalize policy. In line with the typical negative relationship with house
prices, the Swedish current account has deteriorated over the past decade
(Figure 3). Positive wealth effects from rising house prices have combined
with exceptionally low real rates in raising consumption ratios. Hence, if
the Riksbank leaves policy normalization too late, it runs the risk of
triggering not only a house price correction but also a sharp drop in
domestic demand. But growing financial stability risks are only one reason
why we expect the Riksbank to start hiking rates sooner than currently
priced, that is before July 2018. Two recent developments matter more
acutely with a view to the next meeting on 26 October.
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First, some board members including Floden have indicated that the
government's expansionary budget for 2018 would need to be taken into
consideration at the next meeting, implying that it exceeded previous
Riksbank assumptions. Easier fiscal policy going into the election year and
beyond provides the Riksbank with a tangible pivot to justify tighter
monetary policy.
Second, Governor Ingves last week implicitly acknowledged that services
inflation could be overshooting forecasts. Recall that board members
attributed strong prints in June and July to a steep increase in volatile
prices for package holidays. But the last print for August was again
stronger than the Riksbank forecast despite softer prices for package
holidays (Figure 4). This suggests that the recent increase in services
inflation is broad, durable and driven by strong domestic growth.
Importantly, a day after Ingves' comment, the services PMI for September
came in exceptionally strong at 63.8. We thus expect strong details in this
week's inflation print for September to justify a re-assessment of services
inflation as being persistently stronger than previously forecast.
To sum up, we remain long SEK against EUR and CHF in anticipation of a
hawkish Riksbank turn by year-end. While hardly contrarian, our impression
from recent client marketing is that SEK longs are far less extended than in
the summer.
FX daily by Robin Winkler : http://pull.db-gmresearch.com/cgi-bin/pull/-
DocPu11/1272-6DA8/7165222/DB FXDaily_2017-10-10_2f57d05d-ec69-43bc-
acef-227c25d3f353_604.pdf
Theme #4 in our FX Blueprint by Robin Winkler: http://pull.db-gmresearch.com/-
cgi-bin/pull/DocPu11/13519-C6ED/96421186/-
DB FXBlueprint 2017-09-24 GDPBD00000314565.pdf
fcid:
[email protected]
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fcid:
[email protected]
Martin Zeman
Director I Key Client Partners
Deutsche Bank Wealth Management
DB Securities Inc
345 Park Avenue, 10154-0004 New York, NY, USA
Tel.
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Email
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