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Strategists at Danske Bank recommended buying the dips in the cross in the next 3-6 month.

Key Quotes

“We look for a wider range in EUR/SEK over the summer, which we addressed in a sold strangle recommendation”.

“While we did argue for a temporary dip in EUR/SEK as inflation appeared set to meet and even breach the Riksbank’s expectations for a couple of months yet, this is not the case anymore. After the Riksbank raised its CPIF forecast in July, it effectively opened the door for inflation disappointments instead”.

“We still think the Riksbank will postpone the first hike beyond 2018 and that this will weigh on the SEK later in H2. Hence, in a 3-6M perspective, the cross is primarily a buy on dips in our view”.

“Apart from monetary policy, the slowing housing market domestically and the trade war globally are two other headwinds for the SEK. Cheap valuation fundamentally could be seen as a SEK-buying argument though for those with a longer term horizon. On balance, we set our 1M and 3M forecasts at 10.40 (previously 10.20), 6M to 10.50 (previously 10.40) and leave our 12M forecast at 10.20″.