EUR/SEK has risen to the upper end of its recent range of 10.10-10.20. With Swedish inflation expectations appearing to have peaked and recent USD strength, economists at Danske Bank expect the Swedish krona to fall gradually in the medium term, with EUR/SEK rising to 10.30 in six months.
“As evidenced by the strong negative connection between EUR/USD and EUR/SEK, near-term focus remains on the global business cycle, risk sentiment, and, not least, the USD.”
“Much evidence suggests that Swedish inflation has peaked, and that we will see a sharp reduction from Q3 onwards. Monetary policy tightening is still a long way off, as recent Riksbank communication implies patience and a growing focus on inflation dynamics (particularly the effect of the SEK). In the medium term, this, combined with ongoing USD strength, should lead to a gradual depreciation of the SEK.”
“We maintain our prediction profile of 10.20 in 1-3 months, 10.30 in 6 months, and 10.40 in 12 months.”/n
