EUR/SEK eyes 9.30 in 12-month – Danske Bank

SEK is expected to appreciate in the next months, according to analysts at Danske Bank.

Key Quotes

“The fundamental reasons to be bearish EUR/SEK remain muddled by the Riksbank’s easy policy stance. But the July decision to remove the easing bias was a small game changer for the krona and instrumental in reversing the multi-month uptrend. Even ‘baby steps’ in the policy stance matter for the currency markets as seen with recent moves in relation to ECB policy communication”.

“The much-higher-than-expected Swedish June inflation numbers were another blow to long EUR/SEK positions. Tentatively, we see an increased likelihood that inflation will overshoot the Riksbank over the next few months. Overall, the potential upside risks to EUR/SEK have weakened over the past few weeks”.

“We continue to think that the Riksbank will end its QE programme by year-end and we do not expect any further rate cuts. However, we think that the Riksbank can afford to err on the side of caution in terms of future tightening”.

“Hence, market pricing looks a bit too aggressive, but this is also the case for the ECB. The above-mentioned factors alongside the risk of correction given that the pair has moved quite substantially in a short period of time lead us to lower our forecasts for the pair to 9.60 in 1M, 9.50 (9.60) in 3M and 9.40 in 6M (9.50) while keeping our 12M forecast at 9.30”.