As begin with 2016 wage and inflation come into focus, so will the next major wage round scheduled next year.
Agreements covering around 3 million employees (63% of labor force) in the private and public sector will expire.
Unless the Riksbank manages to engineer, a material rise in headline inflation, (current consensus forecast is just 1.0% in early 2016), the risk is that wage negations are benchmarked to very low inflation expectations and employees lock in very weak wage growth for three years.
This in turn will put downward pressure on future inflation, making the task of battling low inflation even harder for the Riksbank.
Assuming core inflation continues its trend acceleration, we see EUR/SEK drifting lower in the latter half of the next year once higher prices become more entrenched and the Riksbank can start to gradually raise interest rates.
Financial imbalances in Sweden are continuing to grow and the stance of monetary policy is dangerously loose on many criteria.
However, we largely rule out a return to the March high against the euro of 9.0547 given recent policy actions.
Stay positioned EUR/SEK with bear call spread:
We maintain our medium-term bullish view on the SEK forecasting a gradual move lower in EUR/SEK towards 9.30 in next 3-4 months.
Beyond Q1, however, the outlook for SEK is much more constructive. The central bank's sensitivity to the transitory impact of import prices on headline inflation should diminish once the wage negotiations are settled.
From a longer-term perspective, the outright level of valuation of SEK is not an issue. In real trade weighted terms, SEK is as cheap as it has been at any time in recent history and Swedish exporters should have no problem living with a gently appreciating currency.
So, go long on 2M (1%) OTM delta call and simultaneously short 2W (0.5%) ITM call with net credit to enter the positions.
The maximum gain achievable deploying these positions is the credit received upon entering the trade.
To reach the maximum profit, the EURSEK needs to close at or below the strike price of the lower striking call sold at maturity where both options would expire worthless.


Bitcoin Smashes Resistance: BTC Eyes 80,000 USD Milestone as ETF Inflows Surge
Bitcoin Rises on Diplomatic Hopes: Bulls Eye $85,000 Ahead of Ceasefire Talks
Sterling Strength: GBPJPY Eyes 217.00 as Inflationary Pressures Mount
FxWirePro- Major Pair levels and bias summary
Euro Under Pressure: EURUSD Retreats Toward 1.1700 as Middle East Tensions Re-Escalate
FxWirePro- Woodies Pivot(Major)
FxWirePro: USD/ZAR neutral in the near-term, scope for downward resumption
FxWirePro: EUR/AUD dips below lower range, bearish bias increases
FxWirePro- Major Crypto levels and bias summary
FxWirePro: USD/JPY softens as Middle East risks cloud BOJ decision
FxWirePro: USD/CAD shows upside momentum, but bearish outlook remains
FxWirePro- Major European Indices
Ethereum Resilience: Institutional Inflows Counter Whale Caution Amid Global Tensions
Ethereum (ETH) has success
Solana at a Crossroads: Triple Bottom Support Offers Lifeline for SOL Bulls
Sterling Surge: GBPJPY Rebounds from Fibonacci Support as Yen Weakness Persists
Yen Under Siege: NZDJPY Bulls Eye 96.00 Amid Broad Japanese Weakness
FxWirePro: USD/JPY edges higher as yen weakens on BOJ policy uncertainty




