While the Swedish market prices in an extended "on hold" policy from the Riksbank, a downside risk premium could build in the curve. This creates an asymmetric opportunity in long duration positions targeting mid-2026, where the possibility of hikes is negligible but the potential for lower yields offers attractive upside.

The Riksbank cut rates, but its forward guidance and a dissenter's vote signal a very high bar for future easing. The move, based on forward-looking inflation expectations rather than current data, effectively marks the end of the easing cycle and creates opportunities for carry trades.

ECB President Lagarde's statement that disinflation is over is likely a backward-looking comment on the progress from 10% inflation. However, the ECB’s own forward-looking forecasts project inflation will fall below its 2% target, suggesting that future rate cuts are more likely than the confident public rhetoric implies.

Despite conflicting inflation data, the Federal Reserve feels compelled to cut interest rates. With markets pricing in a 96% probability of a cut, failing to do so would trigger a significant stock market shock. This makes managing market expectations a primary driver of the policy decision, potentially overriding pure economic rationale.

Contrary to conventional wisdom, a rate cut is not automatically negative for a currency. In economies like Sweden or the Eurozone, a cut can be perceived as growth-positive, thereby supporting the currency. This contrasts with situations like New Zealand, where cuts are a response to poor data and are thus currency-negative, highlighting the importance of economic context.

The market is pricing in approximately three more rate cuts for next year, totaling around 110 basis points. However, J.P. Morgan's analysis, supported by the Fed's own dot plot, suggests only one additional cut is likely, indicating that current market pricing for easing is too aggressive.

The market is pricing 50 basis points of easing from Norges Bank by the end of 2026. However, strong growth, a solid labor market, and high inflation suggest the central bank will not deliver these cuts, implying that front-end Norwegian yields are biased higher.

The Fed's recent hawkish comments are likely a communication strategy to manage market certainty about a December rate cut, rather than a fundamental policy shift. The firm's economist still anticipates a cut, and the market prices in three cuts over 12 months, suggesting the overall easing backdrop remains intact for Emerging Markets.

Internal Bank of England models now indicate its policy stance might have shifted to neutral or even slightly accommodative. This internal uncertainty about the true restrictiveness of rates could limit how much further easing the UK market can price in.