EUR/SEK to reach 10.40 by the summer fueled by hawkish Riksbank – ING

EUR/SEK is now trading around pre-Ukraine-war levels. In the opinion of economists at ING, the Riksbank should continue to be a broadly supportive factor for the krona in the coming months as a radical shift in its rhetoric.

More support to the krona, but watch for external risks

“This week’s policy decision can continue to offer support to the krona. Naturally, a rate hike this Thursday would likely see SEK rally, but we also think that a hawkish shift in the rate projections and some endorsement of the market’s tightening expectations can be enough to put some mild pressure on EUR/SEK. We think only a clear pushback against market pricing would have a material negative impact on SEK.”

“The Riksbank should continue to be a broadly supportive factor for SEK in the coming months. However, the external environment should continue to prove quite challenging for the krona, which may suffer from its high beta to both global risk sentiment and eurozone’s economic outlook.”

“EUR/SEK risks are by and large balanced for Q2, and we expect it to hover around the 10.40 mark into the summer months. Later in the year, some stabilisation in sentiment and the Riksbank’s advantage over the ECB in the tightening cycle can push EUR/SEK to the 10.20-10.00 area.”