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The coronavirus has entered its second month as a major market driver. With containment efforts (inevitably) failing, the epicenter of FX market concerns may now shift more conclusively to the European theater. Sweden and the krona could suffer in the next weeks, analysts at TD Securities advise. 

Key quotes

“As a reliable barometer of risk appetite, we think the krona would be among the hardest-hit if European currencies began to respond to virus concerns like their Asian counterparts.” 

“Sweden’s traditional currency fundamentals also support our view of a weaker SEK this week. Friday brings the Q4 GDP report. We expect this to come in flat on a q/q basis – significantly softer than both the consensus (+0.2%) and the Riksbank’s forecast (+0.3%).” 

“With retail sales, manufacturing and services production weak, we can’t rule out a negative q/q print.” 

“We are reluctant to buy the JPY against the USD, but pursuing JPY upside on the crosses is another matter. In line with this, we are entering a short SEK/JPY position as our Trade of the Week.”

 

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