GERMANY: Union/SPD Migration Alignment After Turmoil Threatened Debt Deal (BILD)

EURSEK has pierced trendline support drawn from the December 2023 low, bringing this week’s sell-off to 1.3%. A clear breach of this trendline (11.3574 today) would signal scope for a deeper retracement and a move towards the Oct 1 low at 11.3024.

• Today’s SEK strength comes despite a relatively subdued session for European equity futures (-0.15% today) and an intraday widening in the 2-year EUR/SEK swap differential (+2bps today to -3.2bps).
• Zooming out a little, a faster pace of ECB easing relative to the Riksbank may limit recoveries in EURSEK in the short-term, though swings in broader risk sentiment in response to US trade developments remain a risk to the krona.
• Swedish January flash inflation is due tomorrow at 0700GMT/0800CET, alongside a speech from Governor Thedeen at 0730GMT (though don’t expect much deviation from his rhetoric in the minutes: “the policy rate has probably been lowered sufficiently”).

Figure 1: EURSEK

• US Data/Speaker Calendar (prior, estimate)
• 5-Feb 0700 MBA Mortgage Applications (-2.0%, --)
• 5-Feb 0730 Richmond Fed Barkin Bbg TV 
• 5-Feb 0815 ADP Employment Change (122k, 150k)
• 5-Feb 0830 US Tsy quarterly refunding ancc
• 5-Feb 0830 Trade Balance (-$78.2B, -$96.8B)
• 5-Feb 0900 Richmond Fed Barkin Fireside Chat (no text, Q&A)
• 5-Feb 0945 S&P Global US Services PMI (52.8, 52.9), Composite (52.4, 52.5)
• 5-Feb 1000 ISM Services Index (54.0 rev, 54.0)
• 5-Feb 1000 ISM Services Prices Paid (64.4, 65.1)
• 5-Feb 1130 US Tsy $64B 17W bill auction
• 5-Feb 1430 Chicago Fed Goolsbee Auto Conference (text, no Q&A)
• 5-Feb 1500 Fed Gov Bowman on economy & bank regs ((text, no Q&A)
• 5-Feb 1930 Fed Gov Jefferson lecture (text, Q&A)

OI data points to a mix of net long setting and short cover in most SOFR futures on Tuesday.

• Net OI swings were relatively limited, once again pointing to a lack of any real conviction, with traders wary of tariff headlines and related risk of two-way price swings.