SEK is undervalued – Lloyds Bank

The research team at Lloyds Bank believes that the SEK is undervalued and forecast the currency to appreciate over the coming year.

Key Quotes

 “The terrorist incident in Stockholm and an easing in market risk sentiment have weighed on the Swedish krona over the past month, making it one of the worst-performing G10 currencies. Moreover, the lack of a durable recovery in inflation has continued to warrant a cautious tone from some members of the Riksbank rate-setting committee. February’s rise in headline CPIF inflation to 2% proved short-lived, with March’s equivalent declining to 1.5%. Base effects are likely to weigh further on inflation over the coming months.”

“Still, given the positive fundamental backdrop for the Swedish economy we remain constructive on the outlook for inflation further out. Growing opposition to further easing at the central bank suggests that the bar for additional stimulus is now much higher and we expect a less-accommodative policy stance to be adopted in the second half of the year. We still believe that the SEK is undervalued and forecast the currency to appreciate over the coming year, with EUR/SEK dropping to 9.10 by end -2017.”