In view of Senior Analyst at Danske Bank Piet Christiansen, SEK is expected to gather further traction in the next months.
“EUR/SEK temporarily moved below 10.30 on Friday driven by a general sell-off in EUR and decent retails sales figures from Sweden. There is no doubt the hawkish tweak of the Riksbank rhetoric has changed the appetite toward the SEK, and we still see potential for additional SEK appreciation in the coming months targeting 10.20 in 3M ahead of a possible rate hike in December (our call)”.
“However, we expect the rate hike from the Riksbank in December to a be one-and-wait, which leaves the repo rate at -0.25% for longer than the Riksbank plans, for the most part of 2019 at least. This should limit the downside potential in EUR/SEK over the medium-term horizon”.
“We target 10.20 by the end of 2019, and given the balance of risk for the SEK (not least given the political situation in Sweden), we recommend taking advantage of the recent SEK appreciation to build up 2019 hedges via Knock-in Forwards, which secures a worst-case rate while maintaining some profit potential in the event of a decline in EUR/SEK”.
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