SEK: Little hope for recovery – Commerzbank
Swedish krona has depreciated by almost 5% against the euro since the beginning of June, and there are several reasons for this, Commerzbank’s FX analyst Antje Praefcke notes.
Riksbank to continue maintaining its dovish stance
“Although it had kept the key interest rate unchanged at 3.75%, the Riksbank's interest rate decision in June has left a dovish aftertaste. Instead of two rate cuts, it now sees the possibility of three rate cuts by the end of the year. The market has since gone even further and its expectations for this year are even lower than those of the Riksbank.”
“The Riksbank's dovish stance laid the foundation for the krona's weakness from June onwards. inflation data for June surprised to the downside. On this fact followed a significant increase in risk aversion on the market, which regularly leads to heavy losses in the Scandies. And the bad news continues: the GDP indicator for the second quarter shows a fall of 0.8% in activity compared to the first.”
“It is therefore no wonder that the market is currently keeping its hands off the krona and that it has little chance of a significant recovery. After all, the Riskbank lowered its forecast for the key interest rate in June precisely because of the favorable inflation trend and the weaker economic activity. The Riksbank will probably not abandon its dovish stance in August either. This will also make it difficult for the krona to significantly correct its summer losses.”
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FXStreet Insights Team
FXStreet
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