EUR/SEK: Gradual weakening of the krona to be continued – Danske Bank

Solid Swedish recovery is nearing its peak. Subsequently, economists at Danske Bank expect the krona to suffer a slow and steady decline.

Riksbank will keep policy soft for the foreseeable future

“The Swedish economy is in the midst of a solid recovery and we foresee 2021 GDP growth in the ballpark of 3.5-4%. However, a somewhat softer global growth momentum during H2 may indicate that growth in the export-oriented Swedish economy is nearing its peak. For 2022, we see growth slightly lower at 3.4%.”

“The SEK has gradually weakened year to date and we expect this trend to continue well into 2022 as the USD continues to strengthen.” 

“As for SEK-specific factors, pricing on the Riksbank has adjusted on the downside which helps explain the weaker SEK. But given our call for multi-years of sub-Riksbank inflation, this might still weigh on the SEK in coming years.”

“A weaker USD than forecasted, and more benign risk sentiment on the back of this, could help the SEK recover some ground. On the other hand, an even softer stance from the Riksbank in light on weak price pressures would in turn weigh even further on the SEK.”

“EUR/SEK forecast: 10.20 (1M), 10.20 (3M), 10.30 (6M), 10.40 (12M), 10.40 (end-2022).”