European corporate earnings and share prices have lagged their US counterparts throughout 2017, but Saxo Bank head of equity strategy Peter Garny thinks that next year could see Continental bulls find their footing.
Squawk / 12 October 2017 at 8:41 GMT
Head of FX Strategy / Saxo Bank
EURSEK jumps after weak CPI release for September, which saw the core inflation unchanged at 2.3% YoY and the headline at 2.1% vs. 2.5%/2.4 expected. The consensus view (including our own) recently has been that EURSEK would continue to grind lower due to SEK's weak valuation and the eventual need for the Riksbank to remove accommodation as the core CPI has stretched above 2.0%.

Even the recently reappointed Riksbank governor Ingves was amenable to some further SEK strength, which seemed to give SEK bulls the green light as the Riskbank has been explicitly targeting the currency in its dovish policy mix. But this weak CPI print and the spike lower in SEK suggests that the market may be over-positioned and the vulnerable side could be higher for EURSEK on the risk of a short squeeze. Bears should be on guard if the price action is sustained above 9.60 for the risk of a spike back toward 9.75 or higher.


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