EUR/SEK: Krona to face a challenging autumn – Danske Bank

EUR/SEK has moved lower but continues to trade in the recent 10.15-10.25 range. With the peak in the global industrial cycle as well as fading support from equities, economists at Danske Bank see headwinds for the export-exposed and pro-cyclical Swedish currency. They expect a weakening of SEK in the medium-term and forecast EUR/SEK at 10.50 in 12 months.

A laughing dove errs on the side of caution

“EUR/SEK remains in an orderly uptrend channel, which we expect will stick in the coming quarters.”

“With the peak in the global industrial cycle, we see headwinds for the export-exposed and pro-cyclical Swedish currency. For risk-sensitive currencies like the SEK, slower growth also means fading support from equities.”

“The Riksbank made clear that they will err on the side of caution. We deem outright and relative pricing on the Riksbank as being too aggressive. If markets align, relative rates momentum and carry suggest major SEK crosses will move higher.” 

“We leave the shor-tend forecast profile unchanged at 10.20 in 1M, 10.20 in 3M, 10.30 in 6M and raise 12M to 10.50 (from 10.40) on the account of a stronger USD.”