The busy central bank month continues this week with the Riksbank meeting on Wednesday taking the limelight after Norges Bank took the Scandi focus last week. Even as the Riksbank is expected to say that the QE programme has now come to an end, we doubt it should be seen as a 'hawkish' signal and, in that respect, it is certainly not unlikely that the Riksbank will 'delay' the first rate hike somewhat. Also in respect of QE, note that the reinvestment could be quite sizeable going forward. In fact, an extension of the QE programme should not be ruled out.
Hence, the divergent monetary policy picture that we have been promoting between Norway and Sweden in Q4 should become more evident, as Norges Bank now expects to start hiking rates in just a years' time. Also, the economic outlook is expected to diverge more in 2018. The housing market is likely to become more of a drag on Swedish growth, whereas the housing correction is more mature in Norway. Oil investments are set to become a positive growth contributor in Norway in 2018.
In our FX and FI Top trades for 2018 , we recommend to position for this divergent picture through a higher NOK/SEK in the FX market and in the FI market we recommend the 'ultimate Scandi roll-trade'. That is to pay 5y5y NOK swap vs EUR and to receive 1y1y SEK vs EUR. The trade rolls positive on both legs. This week, we also recommended to Receive SEKFRAMAR19 and pay NOKFRAMAR19, reflecting our view on relative monetary policy.
In Norway , the coming week brings jobless numbers from the NAV for December. All leading indicators are pointing to continued above-trend growth and rising employment and vacancies seem to be holding up well. We therefore expect an unchanged jobless rate of 2.3%, which translates into a moderate decrease in seasonally-adjusted terms. We expect gross unemployment - our preferred jobless measure - to fall by 1,000 people m/m.
In Denmark , we should expect the budget to be finally approved and we have revised Q3 GDP numbers. We put focus on DGB issuance in 2018.
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