EUR/SEK to grind higher towards 10.50 over next 12 months – Danske Bank

With a global growth slowdown looming and central bank divergence, economists at Danske Bank remain bearish on the Swedish krona; forecasting EUR/SEK at 10.50 in 12 months.

Riksbank pricing is too aggressive
“As for 2022, we still see a case for broad SEK to weaken as global monetary policy has started to diverge.”

“The biggest downside is probably against currencies where the central bank is front-loading policy normalization. The risk is more limited vs EUR, as the RB and the ECB are equally likely to sit out this year at least. That said we still see a strategic case for a weaker SEK against the EUR, as RB pricing is too aggressive (one full hike by end 2022 and three hikes by end 2023).”

“As long as inflation remains elevated, which we think it will do in H1, there should probably be a non-negligible premium for hikes in the money-market curve. Thus limiting the upside in EUR/SEK and maybe even helping to pull EUR/SEK lower from here in the near-term.”
“We raise the 1M estimate to 10.20 (10.10) and otherwise leave the forecast profile unchanged at 10.20 in 3M, 10.30 in 6M and 10.50 in 12M.”