EUR/SEK set to advance nicely as Riksbank stays dovish – TDS

The Riksbank maintained its dovish stance today, affirming it expects to keep rates unchanged at least until the end of its forecast horizon (Q3 2024). EUR/SEK has seen some small upside pressure since the announcement, but economists at TD Securities do expect a major move higher from here.

The Riksbank has presented an unchanged policy stance 

“The Riksbank maintained its dovish stance today. Policymakers kept rates on hold at 0.00%, and declared it expects to remain at zero through at least the end of its forecast horizon (Q3 2024). The Riksbank also kept up its pledge to cut the repo rate if inflation prospects weaken further. Importantly, the tail risk we noted that the Riksbank could signal it was open to a long-dated rate hike did not materialize.

“Ultimately, we think that the reasonably upbeat macro picture will allow the Riksbank to raise rates earlier than it currently expects. We currently pencil this in for 2023.” 

“We have seen a small degree of upside pressure on EUR/SEK in the wake of today's announcement. Anyone contemplating the Riksbank could also take a step in a more hawkish direction has been slightly disappointed. Looking forward however, we do expect a major move higher from here.” 

“With risk appetite still otherwise well-supported, the heavy data schedule between now and tomorrow's NFP should help keep things under wraps for now. We think the 10.17/20 area should cap squeezes for now as the cross has already had a decent clear-out move over the last week or two.”