EUR/SEK set to rise towards 10.60 by year-end – Danske Bank

EUR/SEK has continued its move higher on rebalancing flows and monetary policy divergence. With a dovish repricing of the Riksbank and outlook of global growth decelerating, economists at Danske Bank remain bearish on the krona in the medium-term and target EUR/SEK at 10.60 in 12 months.

Relaxed Riksbank

“In coming months, we expect core inflation in Sweden to rise above the Riksbank’s new forecast. If we are right, markets will probably continue pushing for hikes and that the Riksbank will eventually yield. This, alongside stabilizing risk sentiment, have the potential to push EUR/SEK slightly lower in 1-3M.”

“With a longer horizon, we expect inflation to fall back below target and from that perspective markets’ expectations are still too aggressive – a headwind for the krona.” 

“On balance, we still see a slightly stronger SEK short-term, targeting 10.30 in 3M. Medium-term, dovish repricing of the Riksbank and global growth deceleration eventually takes the cross towards 10.60 by year-end.”