NZD and SEK to benefit ahead of central bank meetings – MUFG

Analysts at MUFG Bank, point out that external drivers are more supportive of the New Zealand Dollar and the Swedish Krona ahead of the Reserve Bank of New Zealand (RBNZ) and Riksbank meetings.

Key Quotes:

“NZD has benefitted from recent easing of global hard landing fears & relatively hawkish repricing of RBNZ rate hike expectations.”

“The NZD and SEK should both continue to benefit from the recent improvement in global investor risk sentiment. The SEK would benefit more if the Riksbank signalled as well that rates will have to peak much higher than 2.50%.”

“The RBNZ (Wed) and Riksbank (Thurs) will be the latest G10 central banks to update their monetary policies in the week ahead. The RBNZ are expected to deliver a sixth consecutive 50bps rate hike lifting the key policy rate up to 4.00%. Market participants are pricing in around a 40% probability that the RBNZ could even deliver a larger 75bps hike following much stronger inflation and wage growth in Q3. The RBNZ’s next policy meeting is not until 22nd February which could encourage the RBNZ to deliver a larger, more-front loaded hike in the week ahead. The Riksbank has been lagging other G10 central banks in tightening policy and is now playing catch up after delivering a 100bp hike in September. The Riksbank is expected to deliver a 75bps hike on Thursday while another 100bps hike can’t be ruled out.”