EUR/SEK: Investors unlikely to rush to the krona even with 50 bps rate hike from Riksbank – ING

Markets expect a 50 basis points (bps) rate hike from the Riksbank. This decision is unlikely to be a game-changer for the Swedish krona, according to economists at ING.

50 bps hike by the Riksbank today

“The Riksbank announces monetary policy today and we expect a 50 bps rate hike, in line with the economists’ consensus and market expectations. Most focus will be on the rate projections, where we expect the Bank to pencil in a 50 bps hike also in September and potentially another 50 bps in November, with the latter possibly coming as a partly hawkish surprise to markets. 

“The Riksbank would most likely welcome a re-appreciation of the krona to fight imported inflation. However, the near-term outlook for SEK remains quite clouded given its high exposure to the unstable risk environment – including most recently its looming entry to NATO.” 

“Even in the event of a hawkish surprise today, we struggle to see EUR/SEK sustaining a break below 10.60.”

“A stabilisation in sentiment in the latter part of the year may be the trigger for EUR/SEK to re-connect with short-term rate dynamics, which clearly point to a much stronger SEK. We still target a return to 10.10-10.30 by year-end.”

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