EUR/SEK to stay above 10.00 as dovish Riksbank caps the krona – ING

Thursday's Riksbank meeting erred more on the dovish side than economists at ING had expected. In their view, the Swedish krona can recover in the short-run, but upside capped in the medium-run.

Solidly dovish performance form the Riksbank

“Riksbank has defied hawkish expectations and is sticking to its past script of no rate hike before 2024 and no change to its balance sheet size in 2022. Both policies are likely to be adjusted earlier than the Riksbank is currently signaling, but with a lot of tightening already in the price, the medium-term upside for SEK is limited.”

“We still think EUR/SEK is mostly facing downside risks in the coming weeks, and we expect a move to the 10.30-10.35 area by the end of this quarter should global risk sentiment stabilise.”

“In the longer run, the Riksbank’s dovishness should continue to put a cap on SEK’s appreciation, especially considering there is still a good deal of tightening (65bp in the next 12 months) to be priced out of the SEK curve. We now expect EUR/SEK to stay above 10.00 for the remainder of the year.”