FI & FX Strategy - Scandies through the lens of ECB action

This piece of research is an effort to try to outline if there are any possible unintended market consequences, with focus on the Scandies, which may follow in the foot-prints of further expansionary action by the ECB...
In our view, the risk that ECB will disappoint markets in a meaningful way is limited and when a central bank is increasing the amount of stimulus it’s indeed difficult to end up with the conclusion that it will lead to negative market effects. However, things like negative deposit rates and QE is uncharted action in its nature and can nevertheless trigger flows and chain reactions in asset space that may not be ideal – particularly in the light of the past years one-sided action in risky assets and fixed income spread-over, and given the abnormally high directionality these different assets have exhibited…

This material should not be seen as a base-line scenario, but rather the intention is that it should serve as a thought-provoker or foundation for discussion...