Economists at ING expect the Swedish central bank to continue signalling that interest rates will stay flat for years to come, despite the latest wave of covid proving to be less economically damaging than first thought. Still, prospects of improved global growth bode well for the krona in the coming months.
Krona upside ahead despite central bank caution
“The April Riksbank meeting should be a non-event for Sweden's krona. The Riksbank is set to remain cautious and look through the temporary increase in CPI in coming months, reiterating no change in interest rates over the monetary policy horizon. All of this is expected and should have a negligible impact on SEK.”
“Although the Riksbank won’t be acting as a tailwind for the currency (unlike the Norges Bank in relation to Norway's krone), we remain constructive on the krona and expect EUR/SEK to push below 10.00 level by summer this year.”
“As the eurozone economy continues its recovery and starts to catch up with the US, the subsequent, more synchronised, global recovery in the second half of the year should benefit SEK (as the Swedish economy is levered to global growth).”
“We also note that EUR/SEK above 10.00 means that the krona remains undervalued vs the euro, suggesting some upside for the currency in coming months.”
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