EUR/SEK: Breach of 12 only a formality if Riksbank does not seem sufficiently restrictive – Commerzbank

EUR/SEK has almost reached the 12 mark. Antje Praefcke, FX Analyst at Commerzbank, analyzes Krona’s outlook ahead of Thursday’s Riksbank meeting.

Does the Riksbank have the guts?

If I as a central bank give the impression that I am not taking particularly decisive action against stubbornly high inflation levels and might drop behind the curve I cannot be surprised if my currency depreciates on the market. That is why in my view a restrictive monetary policy signal would be urgently required. In the long run verbal interventions against currency weakness are not going to do any good, the only thing that will help is the credibly conveyed will to fight price risks.

That is why I hope that the Riksbank will summons the courage to seem sufficiently restrictive despite the possible slowing effects on the economy, for example in the shape of a 50 bps rate hike or a clear signal in support of a further rate hike this year. Otherwise, a breach of the 12 mark in EUR/SEK will only be a formality in my view and will come what may.