The Swedish krone and Norwegian krone will have a tumultuous week. Chinese-American trade will continue to dominate the headlines, though Italy's political risk may temporarily attract attention.
The Bank of Norway's interest rate decision will be the focus of the Norwegian krone traders. While Swedish krone investors are focusing their investment decisions on CPI data and housing reports that may say worrying things about the Nordic financial system.
Markets have been affected by Beijing and Washington tensions this month, leading to a 5% loss in the S & P500 in less than a week, given the state of the US-China trade war. The latest developments include China's decision to ban agricultural imports from the United States with future scarce mineral sanctions.
The Norges Bank (NB) will be announcing its rate decision this week with expectations that officials will vote to hold the benchmark interest rate at 1.25 percent. The NB remains one of the more hawkish central banks in the developed world. However, their inclination to raise rates may be undermined by weakening demand and the decline in crude oil prices.
For most of 2019, the Norges Bank has remained resilient and has been able to stave off adopting a more accommodative monetary policy that most of its peers have been forced to implement. The Norwegian Krone’s tie to Norway’s petroleum-based economy leaves it at the mercy of oscillations in crude oil prices that frequently move in tandem with market sentiment.
SWEDISH KRONA MAY SINK ON CPI DATA
It is likely the Krone will continue to seesaw between desperate hope and despair as political shocks and trade negotiations continue to rock markets. The Swedish Krona faces similar risks to the Krone, though local data this week may temporarily overshadow fundamental themes. Nordic traders will closely be watching the release of a CPI data dump that may miss estimates and fuel expectations of a delayed hike by the Riksbank.
Investors may also keep a peripheral eye on the publication of housing data. Concerns about rising household indebtedness is continuing to haunt policymakers who fear an economic downturn could destabilize Sweden’s financial system .