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Macro and Vol Commentary

EURSEK weakened in March, with SEK gaining 5.3% against the euro. Can the trend continue in the next couple of months?

Economic Data

  • Data started to decline, with the GDP indicator falling 0.8% M/M, significantly below the estimate of 0.5%. January data was revised lower at -0.5% in January.
    • GDP stood at 5.2% Y/Y in Q4 2021; the next release is May 30th, and this will cause the market
  • In line with the higher inflationary environment, consumer confidence declines, with March data falling to 73.5 from a revised 89 figure the month before.
    • Household consumption declined by 0.2% in February, with Y/Y data at 3.4%.
    • The economic tendency survey has also declined from 113.1 in February to 110.3 in March. Data is deteriorating, and we expect the economic tendency survey to decline further in the coming months.
    • M/M data tells the story, and monthly retail sales fell -by 0.1% in February, down from a revised 3.7% in January. The Y/Y data were also falling and was 2.9% in February, down from a revised 4.2% in February.
    • Household lending has continued to rise and reached the highest level since 2017 in December 2021 at 6.7478%; however, March data was 6.9% Y/Y. This outlines that household debt and liabilities continue to rise, and the inflationary environment continues to pressure the Swedish economy.
  • CPI Y/Y reached 4.3% in February, with month-on-month data reaching 0.9%. CPIF Y/Y stands at 4.5% in February. Next month’s estimate for CPIF is 5.6% Y/Y, and the prospect of a higher inflation reading is robust and potentially beats expectations.
    • Ex-energy Y/Y is expected to rise 3.7%, with M/M at 0.6%.
    • Energy prices have edged lower in the last month so we could see CPI, including energy, edge lower in the coming months, but the risk is skewed to the upside in the near term.
    • 20% of the energy supply was oil in 2020, biofuel and waste have increased, and wind & solar and hydro are increasing. Sweden’s decarbonisation trend is ahead of the curve, with emissions down 38.28% from 1990, with their target of 59% by 2030. This should protect Sweden from higher energy prices in the long run, but it will not make a difference in the immediate term.
    • Rent is also rising sharply, which will cause CPI to rise in the near term but only equates to 7% of the index.
    • PPI is rising sharply and stood at 19.3% Y/Y in February, up 1.2% M/M. This will keep CPI elevated as companies pass on higher prices to consumers.
  • The unemployment rate continues to fall and stood at 3.2%, down from 3.4% in February. Including support programs, March’s data reach 6.9%, down from 7.16%.
    • Wages were rising considerably slower than inflation at 2.21% in December 2021.
  • In February, industrial production moderated to 2.3% Y/Y, down from a revised 3.2% Y/Y.
    • Industrial orders M/M was declining on an M/M basis and stood at 1.4% in February, down from a revised 9.4% in January. The year-on-year figure reached 1.3% in the same month.
  • Service production value reached 6.1% and is a vital economic sector as Sweden brushed off COVID.
    • Private-sector production also rises at 3.5% Y/Y and is declining 0.9% on an M/M.
  • Manufacturing is robust and was 57.3 in March, fractionally lower than February’s figure of 58.
    • The war in Ukraine caused some softness to the index, as participants expect supply disruptions to continue. Input prices and these supply disruptions continue, which is likely to present a downside to the PMI.
    • Services and composite PMI are also declining but are expansionary at 65.3 and 63.1, respectively.

Monetary Policy

  • The Riksbank turned hawkish, prompting SEK to rally against the euro. The bank will purchase SEK37bn bonds in Q2 (the same as Q1) and has indicated that the forecast for repo rate rises will be H2 2024, slightly earlier than their previous assessment. However, we expect this to be brought forward once again and rates to rise in 2022.
  • The balance sheet is likely to be trimmed before this, in Q3, but central banks are indicating that inflation should start to moderate in H2 2022, but the war in Ukraine and China’s COVID policy should keep prices higher for longer.
  • As of March 31st, 2022, holdings were (SEK) 395.4bn government securities, 20bn treasury bills, 417.6bn covered bonds, municipal bonds 117.1bn, and corporate bonds 12.2bn; this caused a total of 962.3bn, up from 957.6bn in February.
  • Bond yields are rising, and the breakeven inflation rate for the 10-year CPI linked bonds stands at 2.98%. The 10-year yield stands at 1.549% as of April 12th.
  • We expect the front end and the belly of the curve to rise, prompting further flattening from the yield curve; this should give further rise to SEK.

The European economy continues to struggle, and the ECB suggests holding off on tightening monetary policy will give rise to SEK. The move away from energy from Russia will come at a cost, and food inflation is another issue the bloc must contend with. Sweden’s inflation is lower, but the trend is the same; previously, we have seen the Riksbank as a barometer for the ECB, but less so in recent years; however, now the inflation trend is similar, could we see this trend return. Sweden’s economy, while growing, is losing momentum. This could present the Riksbank with a dilemma come Q3 if the economy continues to contract, but inflationary pressures have persisted. Swedish inflationary data is lower than Europe’s, but core inflation is higher. In our opinion, the European data will be weaker than Sweden’s, exemplified by Germany’s inflationary data and ZEW survey expectations, and the ECB will hold firm this week. Still, the hawkish members of the council are growing in numbers and voice. The implied probability for a rate hike in July is 104.4%, September 192.6%, October 132.1%, and December 174.9%. A more hawkish ECB could see EURSEK rally in the immediate term. However, we favour a move through 10.2722 and then 10.20 in the longer run, and the reaffirmation of resistance between 10.35 and 10.40 would strengthen the trend.

Volatility Commentary

EURSEK along side macro FX vols has come off since the Ukraine-Russia peak, though with persistent inflation furthered by the Ukraine-Russia war we find ourselves seeing Central Banks across the board entering rate hike cycles with new found urgency. As we enter the rate hike cycle we prefer being slightly long vega/gamma on this par with the path of rate hikes still uncertain with potential to continue changing in line with economic data as Central Banks wrestle with balancing inflation vs jobs and potentially slowing economic growth.

EURSEK 1-month Realised and Implied Volatility

EURSEK Trade Idea

  • To take advantage of a short term move up spot followed by EURSEK weakening
  • Buy 3 month EURSEK KI Put with strike 10.2000 and KI up barrier 10.400, priced in 10m EUR circa 35k EUR premium cost
  • For reference vanilla equivalent put would be circa 90k EUR premium cost

Positioning Charts

USDBRL NDO Positioning Data 06/04/2022 - 13/04/2022

The options market was more subdued in the week to April 20th, the range was narrower with the market trading between 4.40-5. There was very little calls traded suggesting limited upside capacity. The market is expected to decline with options due for expiry favouring the downside, the notional value is large and this could suggest more conviction. 

USDBRL NDO Positioning Data 13/04/2022 - 20/04/2022

USDCNY Vanilla Positioning Data 06/04/2022 - 13/04/2022

The options market has now shifted in favour of the upside but more so in the long run. Near term sentiment is mixed, there are some put options traded below the market. The call options have a moderate notional value suggesting mild conviction. We could see USDCNY rally in the near term. 

USDCNY Vanilla Positioning Data 13/04/2022 - 20/04/2022

EURSEK Vanilla Positioning Data 20/02/2022 - 20/03/2022

 We have seen more downside cover for the market in the week to the 20th April. Spot has moved significantly lower with options traded around 10 with a notable notional value. We expect this to remain the case in the near term and we could see the market drift lower. There is little upside cover, with some call options trading up to 10.5 compared to 11.20 the previous week. Notional values for the call options were low suggest little conviction. 

EURSEK Vanilla Positioning Data 20/03/2022 - 20/04/2022


Charts and Tables

FX Expiries

Volatility Grid

Historical Spot FX Volatility (30D Rolling)

FX Matrix (today)

Weekly Change

Key Events & Releases

Technical Analysis

JP Morgan Global FX Volatility 


Buying pressure has been moderate recently, but the index managed to break above the trend resistance to settle into 9.14; it has remained near that level since. The MACD diff negative and diverging, and the stochastics are falling in the oversold, suggesting further selling pressures before a trend reversal. The recent trading activity has been capped by 200 MA at 9.19, and if this level is broken, we could see the market gain ground towards the 23.6% fib level at 9.42, where it would reject the descending triangle pattern that has been forming in recent months. On the downside, in order to regain downside conviction, the market needs to break back below the trend line and then target 8.85 – a robust support level. The trading activity has moderated in recent sessions as the index is trading range-bound between the trend line and the MAs; an outbreak out of these levels would help confirm the longer-term momentum.

Dollar Index 


The recent trend has been strong as the index has strengthened, but resistance at 100 has held firm prompting a marginal correction to the downside and creating a double top formation. The stochastics are rising, with the %K/%D stochastics now in the overbought territory, the MACD diff is positive and diverging, and this could trigger a break of 100 in the near term. A break of this level would bring into play 101.88, the multi-year highs, a breach there would confirm the long bullish candle. However, if prices break below 50 MA support of 100.45, this could set the prices towards the recent trend at 100. The indicators continue to edge higher, but with the stochastics being overbought, we expect the index to correct in the near term.



The pair has been range-bound in recent weeks, trading in the 10.22-10.36 range. More recently, the market has struggled to break above the 100, and 50 MAs at 10.30, and so candle bodies shortened, pointing to a lack of appetite above the current resistance. The stochastics converged on the downside, and the MACD is positive and converging, suggesting that we could see the pair break back below the 10.25 level, with a downside target of 10.22 in the near term. On the upside, if support around 10.25 holds firm, this could trigger gains back through the MAs resistance and target 10.36. The indicators suggest we could see the pair edge lower in the near term, but the candle bodies suggest a lack of appetite for prices below the robust support level.



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