EUR/SEK to advance nicely towards 10.30 as krona weakens gradually – Danske Bank

EUR/SEK has moved to the higher end of the recent 10.10-10.20 range. With Swedish inflation expectations seemingly having peaked and with recent USD strength, economists at Danske Bank forecast a gradual weakening of the Swedish krona in the medium-term and forecast EUR/SEK to 10.30 in six months.

Monetary policy tightening is still a long way down the road

“Near-term, focus remains on the global business cycle, risk sentiment and not least the USD, as evident by the strong negative correlation between EUR/USD and EUR/SEK.”

“Much point towards that Swedish inflation has peaked and that we are in for a rather steep drop from Q3 and onwards. As recent Riksbank communication signals patience and an increasing focus on inflation dynamics (including the role of the SEK), monetary policy tightening is still a long way down the road. This, coupled with continued USD-strength, should lead to a gradual weakening of the SEK over the medium-term.” 

“We keep our forecast profile unchanged at 10.20 in 1-3M and 10.30 in 6M and 10.40 in 12M.”