Sweden to lead the way with monetary tightening

Economic prospects are fairly bright in the Nordic and Swiss countries. Switzerland is benefitting from faster growth in the euro-zone, Swedish firms are optimistic about their prospects, and Norway is recovering from its oil-related slowdown. As Swedish inflationary pressures are building, we think that the Riksbank will tighten policy sooner and faster than most anticipate. As a result the krona looks set to rise sharply. While prospects for Switzerland have brightened, the Swiss National Bank is likely to hike more slowly than the European Central Bank. This, together with less safe-haven demand due to reduced political uncertainty elsewhere, suggests that the franc will weaken. Our forecast that oil prices will fall next year, and our expectation for the Norges Bank to leave policy unchanged until 2020, imply that the krone is also set to depreciate.