EUR/SEK set to advance nicely towards 10.50 on dovish repricing of Riksbank – Danske Bank

EUR/SEK has continued its rally upwards currently trading around 10.25. With a global growth slowdown looming and central bank divergence, economists at Danske Bank remain bearish on the Swedish krona forecasting 10.50 in 12 months.

SEK set to weaken in 2022 amid CB divergence

“The seasonal pattern suggests EUR/SEK will go lower in the last two weeks of December. Since 2009, the cross has posted negative returns in December every year except 2014, on average -0.9%, making the best SEK month of the year. 

“Fundamentals like central bank divergence and global growth slowdown act as headwinds for broad SEK in 2022. The Riksbank remains in ‘team transitory’, in contrast to a handful of peers. We believe the Riksbank will sit on its hands for the next two years at least, which makes market expectations much too aggressive.”

“We stick to our view of a temporary dip over year-end and a weaker SEK in the 3-12M perspective. We see 10.10 (from 10.00) in 1M, 10.20 (from 10.10) in 3M, 10.30 (unch.) in 6M and 10.50 (unch.) in 12M.”