Market might seem disappointed and sell krona if Riksbank were to hike by 50 bps – Commerzbank

The Swedish central bank (Riksbank) is likely to hike its key rate by 50 bps to 0.75%. In this case, economists at Commerzbank expect the krona to come under selling pressure.

Will Riksbank surprise?

“If Riksbank were to hike by 50 bps, the market might seem disappointed and sell krona. A 75 bps step would come as a surprise for the majority and is likely to support krona.”

“In view of the nonetheless very negative real interest rates the krona’s appreciation potential is likely to be limited though. Moreover, market sentiment is likely to remain subdued due to recession fears, thus not providing a suitable environment for a stronger krona.”

See – Riksbank Preview: Forecasts from five major banks, joining the 50 bps club