Martin Enlund, analyst at Nordea Markets, points out that the SEK recently hit a new record low in trade-weighted and price-adjusted terms and in February this year, it weakened beyond previous all-time-lows during the depths of the global financial crisis in 2009.
Key Quotes
“While several Riksbank officials have expressed surprise that the SEK is so weak, they are doing little to support the krona. Instead, they are likely to keep undermining it – intentionally or not – in a global economic environment that is growing more toxic.”
“An updated look at the drivers of the SEK reveals that i) Swedish growth will underperform Euro-area growth until the second half of 2020 on our forecasts, ii) the Riksbank will decide to expand its balance sheet to pre-reinvest maturities in 2020, iii) the Riksbank will also have to cancel its rate-hiking plans based on a weak outlook for inflation, while iv) domestic and global risks remain tilted towards the downside. All these factors speak against a significant recovery of the krona, we therefore change our EUR/SEK forecast accordingly.”
“If consensus growth expectations are revised in the direction of Swedish outperformance ending – or perhaps even in the direction of underperformance, one could argue it augurs EUR/SEK at 11.0 – or even higher.”
“The average behaviour of EUR/SEK ahead of the past two US recessions indicate that EUR/SEK might rise above 12, should the US enter a new recession in early 2020. This is definitely not our forecast.”
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