Analysts at Danske Bank revised higher their forecast for the Swedish krona versus the euro. They now see the EUR/SEK pair moving to 10.50 on a one-to-three month period and to 10.30 on a six-to-twelve months horizon.
“After the Q2 blowout, Q3 looks set to post a decent rebound here and almost everywhere. We believe this part of the reflation narrative has probably passed its most dynamic period though. Going forward, we expect the recovery to lose momentum, which suggests that the best part of the SEK impetus is behind us. That said, as long as the recovery goes the right way, the SEK should still have some friends out there.”
“The repo rate as a means to support the economy. Inflation is running significantly below target. While 5Y inflation expectations are falling, the Riksbank is satisfied with a level of around 1.7-1.8%. The Riksbank is keeping the door open for a return to negative rates if the credibility of the 2% target is threatened; this, in our view, limits the downside potential in EUR/SEK. Board members have downplayed the previous SEK appreciation.”
“Question marks over the reflation narrative, signs of a recovery slowdown, not least in Europe, disappointing inflation prints and a Fed that failed to get out the big guns have weighed on the SEK, in particular vs the USD, and taken EUR/SEK a leg higher in its ascending trend since 21 July. We believe part of the SEK sell-off seems overdone though.”
“While the Riksbank is normally a key driver, it is less so now, while global factors dominate. Catalysts for a weaker SEK could be further headwinds for reflation optimism or if the Riksbank, contrary to our base scenario, goes negative again. On the other hand, a strong reflationary comeback could send EUR/SEK back toward 2020 lows, where it would find itself close to medium-term fair value. On balance, we raise our trajectory to 10.50 (10.30) in one-to-three months and 10.30 (10.10) in six-to-twelve months.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.