2014.04.2413:29:00UTC+00Long Gbp/sek

Quotes from UniCredit Research:

- Historically there has been a very tight relationship between UK and Swedish 2Y swap rate differentials and GBP-SEK. We establish today that the two series are co integrated which implies that divergences should close in the near future. We also establish that these divergences exert mostly an impact on the exchange rate; the current divergence (GBP-SEK lower than the interest rate differential would suggest) implies a 1.4% appreciation in GBP-SEK in the space of 1 month.

- We view this as the lowest level of gain in the short to medium term, because we expect the BoE to hike rates earlier than consensus (in 4Q14), therefore exerting upward pressure on UK rates and widening the differential further, as the divergent monetary policies become more apparent.

- For these reasons and taking advantage of the recent drop in GBP-SEK - which, in our view represents only a temporary move in an otherwise uptrend - we initiate a long GBP-SEK trade recommendation, with a target of 11.3500 and a stop-loss on a close below 10.8700.