EUR/SEK to rally above 12.00 on a dovish Riksbank surprise – ING
|The Riksbank meets today. Economists at ING analyze SEK outlook ahead of the Interest Rate Decision.
A crucial moment for SEK
Markets are fully pricing in a 25 bps hike, which is also the consensus view and our house call. The weakness of the Swedish Krona is a major reason why the Riksbank cannot underdeliver compared to market expectations.
The risks are that some Riksbank members focus on the economic and inflation slowdown and oppose a rate hike or an upward revision in the rate path. This happened back in April and paved the way for a long period of SEK depreciation. Our base case is that the Riksbank will not make the same mistake again and deliver a convincingly hawkish and FX-supportive hike today.
We see EUR/SEK drop to the 11.77 mark in a hawkish scenario today.
A dovish surprise would make a rally to above 12.00 levels very feasible.
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