This month, the Swedish krona has also weakened (-2.8%) against the euro. It has been the worst period of performance for the krona since September of last year. The Riksbank will deliver its latest policy update today. Economists at MUFG Bank expect the SEK to appreciate against the euro as the divergence between their central banks intensifies.
The domestic COVID-19 situation in Sweden does not appear so bad
“New covid cases have risen less sharply in Sweden over the past month and are still well below levels recorded last winter and during the first half of this year. It puts less pressure on the Swedish government to re-tighten restrictions. The Swedish krona has though failed to benefit so far from this relatively favourable COVID-19 trend.”
“We expect the Riksbank to follow other central banks by delivering a more hawkish policy signal but the planned pace of tightening should remain relatively slow.”
“We expect the Riksbank to begin raising rates in 2023, and policy tightening next year is more likely to focus on shrinking their balance sheet. It should lead to greater policy divergence with the ECB placing modest downward pressure on EUR/SEK in the year ahead.”
“We expect the Swedish krona to rebound against the euro once current market fears subside. However, it should continue to underperform more broadly as the Riksbank lags other G10 central banks in tightening policy alongside the ECB.”
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.