EFTA01434461.pdf

Subject: It's very hot - SEK Correlation Ideas From: Martin Zeman ffi . Date: Tue, 10 Oct 2017 09:30:57 -0400 To: "Paul Barrett Cc: Davide-A Sferrazza Xavier Avila Joshua Shoshan Vahe Stepanian Stewart Oldfield Good morning Paul, I know we can't trade options just yet, but we're looking at some bullish SEK ideas this morning, thought I'd share with you based on George Saravelos' research piece. Here are some of our preferred bullish-SEK expressions in the Correlation space. Spot Refs: 1.1790, 8.0775, 1.3190 1) USDSEK Digital Puts w/ EURUSD DKO's 3m USDSEK 7.80 Digital Put w/ EURUSD DKO 1.14-1.22 6.5% offer 3m USDSEK 7.80 Digital Put w/ EURUSD DKO 1.13-1.23 9.3% offer 3m USDSEK 7.90 Digital Put w/ EURUSD DKO 1.14-1.22 11% offer USDSEK 7.80 Digital outright would be 23% offered. USDSEK 7.90 Digital outright would be 34.5% offered. 2) GBPUSD Lower, USDSEK Lower Dual Digitals 3m Dual Digital GBPUSD < 1.30 EFTA01434461 USDSEK < 7.90 6% offer Individuals: 33%, 34.5% 3m Dual Digital GBPUSD < 1.30 USDSEK < 8.0 8.75% offer Individuals: 33%, 47.5% And a full Dual Digital Grid ... {cid:[email protected]} From: George Saravelos [mailto:[email protected]] Sent: Tuesday, October 10, 2017 3:58 AM Subject: It's very hot We are very bullish on the Swedish krona. To start with, Swedes have the world's hottest property market. Comparative data updated by the OECD last week show that Sweden has taken the pole position from New Zealand this year, with Swedish real house prices now double their thirty-year average. More significantly, unlike runners-up New Zealand, Australia and Norway, Sweden has seen valuations rise far above pre-crisis peaks (Figures 1& 2). The international comparison stresses the urgency for the Riksbank to normalize policy. In line with the typical negative relationship with house prices, the Swedish current account has deteriorated over the past decade (Figure 3). Positive wealth effects from rising house prices have combined with exceptionally low real rates in raising consumption ratios. Hence, if the Riksbank leaves policy normalization too late, it runs the risk of triggering not only a house price correction but also a sharp drop in domestic demand. But growing financial stability risks are only one reason why we expect the Riksbank to start hiking rates sooner than currently priced, that is before July 2018. Two recent developments matter more acutely with a view to the next meeting on 26 October. EFTA01434462 First, some board members including Floden have indicated that the government's expansionary budget for 2018 would need to be taken into consideration at the next meeting, implying that it exceeded previous Riksbank assumptions. Easier fiscal policy going into the election year and beyond provides the Riksbank with a tangible pivot to justify tighter monetary policy. Second, Governor Ingves last week implicitly acknowledged that services inflation could be overshooting forecasts. Recall that board members attributed strong prints in June and July to a steep increase in volatile prices for package holidays. But the last print for August was again stronger than the Riksbank forecast despite softer prices for package holidays (Figure 4). This suggests that the recent increase in services inflation is broad, durable and driven by strong domestic growth. Importantly, a day after Ingves' comment, the services PMI for September came in exceptionally strong at 63.8. We thus expect strong details in this week's inflation print for September to justify a re-assessment of services inflation as being persistently stronger than previously forecast. To sum up, we remain long SEK against EUR and CHF in anticipation of a hawkish Riksbank turn by year-end. While hardly contrarian, our impression from recent client marketing is that SEK longs are far less extended than in the summer. FX daily by Robin Winkler : http://pull.db-gmresearch.com/cgi-bin/pull/- DocPu11/1272-6DA8/7165222/DB FXDaily_2017-10-10_2f57d05d-ec69-43bc- acef-227c25d3f353_604.pdf Theme #4 in our FX Blueprint by Robin Winkler: http://pull.db-gmresearch.com/- cgi-bin/pull/DocPu11/13519-C6ED/96421186/- DB FXBlueprint 2017-09-24 GDPBD00000314565.pdf fcid:[email protected] {cid:[email protected]} {cid:[email protected]} {cid:[email protected]}{cid:[email protected]} EFTA01434463 fcid:[email protected] Martin Zeman Director I Key Client Partners Deutsche Bank Wealth Management DB Securities Inc 345 Park Avenue, 10154-0004 New York, NY, USA Tel. 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