Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 27 April 2017 at 12:02 GMT

Mid-session Europe: SEK tumbles on dovish Riksbank

Saxo Markets



European bourses are lower ahead of the European Central Bank's latest policy announcement, but the expected steady course will likely do little to change the trend. At present, equities are caught in the wake of US president Trump's failure to cheer Wall Street with the tax plan outlines released Wednesday; with little expected from the ECB, it may be down to leading French centrist Emmanuel Macron to spark a risk bounce in Europe (as he has already done in bond markets).

The Mexican peso and Canadian dollar rebounded strongly after Trump stated that he would not pull the US out of Nafta, but the free trade-sceptical administration has not ruled out such a move in future.

Meanwhile, Deutsche Bank shares are tumbling despite a leap in profits and Sweden's Riksbank has left its repo rate unchanged at minus 0.50% as expected but provided more a dovish commentary than anticipated, extending QE and pushing out inflation forecasts.


  • US March Adv.Goods Trade Balance (1230 GMT) 
  • US March Prelim.Durable Goods orders (1230 GMT) 
  • ECB Draghi press conference (1230 GMT) 
  • US March Pending Home Sales (1400 GMT)
Forex developments

Markets have seen muted trading in the first half of the European FX session with all eyes focused on the upcoming ECB Rate Announcement at 1145 GMT. 

EURUSD is mainly unmoved near the 1.09 area, maintaining well above its 200-day moving averafe, which mirrors the USD index staying below both its 200-day EMA and local resistance at around 99.00.
One of the key movers so far is EURSEK adding around 1% and trading near the 9.65 level on a surprisingly dovish Riksbank outing.

USDJPY is rangebound in between its 200-day and 100-day EMAs at 111 and 111.5 respectively. 

GBP: Cable traded on the bid and is currently attempting to breach above 1.29, representing an 0.4% daily gain.

FX Options volatilities

The news overnight was Trump’s tax proposal and his statement on agreeing not to break up the Nafta deal “for the time being”. There was very limited reaction to the tax proposal, but also no bigger volatility was priced in for this event. On Nafta, USDMXN and USDCAD vols traded higher ahead of his statement, but went down again on the announcement.

EURSEK overnight was trading at 15 vols ahead of today’s Riksbank meeting, implying a 0.8% expected range which spot has delivered.

In EURUSD, we have the ECB today and there is some uncertainty weather it will be more hawkish now that worries of a French Le Pen victory have abated. 

We therefore also see a heavy risk-reversal skew for EUR calls ahead of today’s meeting. 

Fixed income





European stocks fell Thursday with Deutsche Bank falling despite a leap in profit as investors waited for a policy update from the European Central Bank. The outline of Trump’s plan for tax cuts and changes also lacked detail, a negative signal for investors.

The Dax 30 fell 0.3% to 12,433, the CAC 40 lost 0.4% at 5,266 and the FTSE 100 gave up 0.5% to 7,241.

No sector traded higher, with oil and gas, consumer goods, and utility shares logging the biggest losses.

Deutsche Bank shares dropped 3% after the German lending heavyweight’s profit doubled in the first quarter, but revenue came in roughly flat when adjusted for the impact of credit spreads.

Lloyds Banking leapt 3.8%, its best session since February 22. The lender said first-quarter net profit surged to £766 million from £405 million a year earlier, aided by a decline in bad loans. The UK government, which bailed out Lloyds during the financial crisis, is expected to sell its remaining shares in the bank in the coming months

Deutsche Lufthansa shares were down 1.7% after the airline group swung to a first-quarter operating profit of 25 million euros ($27.3 million). The airline group earlier this month said ticket pricing was more positive on a currency-adjusted basis.

Bayer shares were up 3.1% after the German pharmaceuticals and chemicals maker reported a 38% jump in net profit for the first quarter and raised its outlook for the full year.

WPP fell 1.9% after the world’s largest advertising company said revenue growth slowed in the first quarter as clients spent less in the U.S. and emerging markets.

AstraZeneca fell 1.1% after the drug maker said first-quarter profit declined 17% to $537 million as it battles declining sales of its blockbuster cholesterol pill Crestor.

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Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

Sweden's central bank surprised to the dovish side today; next up is the ECB.
Photo: Shutterstock

— Edited by Michael McKenna

The Global Sales Trading desk is a multi-asset team providing customised trading solutions


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