EUR/SEK: Unyielding Riksbank limits upside potential – Danske Bank

Economists at Danske Bank expect the Riksbank to be on hold for an extended period of time and the EUR/SEK pair to trade at 10.80 in 6-12 months.

Key quotes

“Poor growth readings and the disastrous inflation data, with CPIF left in deflation territory and expectations at record lows, are both fundamental headwinds for the SEK, suggesting a positive bias in EUR/SEK.” 

“While stock markets seem increasingly out of line with the gloomy economic outlook, there is a clear risk of setbacks, which would be bullish EUR/SEK. If the stock-market rally continues, uninterrupted, EUR/SEK could head lower.” 

“We have updated our call for the Riksbank (RB), no longer expecting a cut within the 12M horizon. We now see EUR/SEK at 10.60 in 1-3M and 10.80 in 6-12M.”