In September, Sweden’s industrial production value increased from 10.6% to 13.5% year-over-year. This reflects an upward trend in the country’s industrial sector.
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The strong Swedish industrial production number, which at 13.5% is the highest reading we’ve seen since the post-pandemic recovery boom in 2021, suggests the Swedish Krona is undervalued. We should be considering call options on the SEK, especially against currencies where central banks are talking about cutting rates. This data, combined with a recent 4.2% jump in Swedish manufacturing orders, signals continued economic momentum.
While the end of the US government shutdown is a short-term positive, the underlying narrative is about Federal Reserve rate cut bets. Last week’s Non-Farm Payrolls report showed a gain of only 85,000 jobs, significantly missing expectations and fueling speculation that the Fed will have to ease policy in early 2026. This makes derivatives that profit from falling US interest rates, such as SOFR futures, look increasingly attractive.
Central Bank Policy Differences
The clear policy differences between central banks are driving major currency moves, with the EUR/JPY testing record highs. The Bank of Japan shows no sign of ending its loose monetary policy, while the European Central Bank is holding steady, creating a powerful trend. We see this as an opportunity to maintain positions that are short the Japanese Yen.
Gold’s rally toward $4,100 is a direct response to concerns about global growth and the likelihood of lower US rates, which makes non-yielding assets more appealing. This reminds us of the setup in the late 2010s before the Fed pivoted, which sparked a major run in precious metals. Long positions in gold futures or call options on gold mining ETFs could benefit if this trend continues.
