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The SEK has boosted by almost 13% vs the USD and 4% vs the EUR over the last three months. Jeremy Stretch from CIBC Capital Markets expects the appreciation to continue into the year-end and forecast the EUR/SEK trading at 10.35 by the third quarter and at 10.20 by end-2020.

Key quotes

“Since the economy was not locked down like most other majors, there has been a limited degree of collateral damage. Annual retail sales troughing at -1.4% underlines the moderate scale of macro negativity. The Riksbank has still adopted further unconventional monetary policies, via the expansion in QE to SEK 500 billion and the bank is set to start purchasing corporate bonds in September.” 

“The pace of QE purchases suggests that the central bank is in no hurry to utilise its policy tools. The inflation data in particular validates central bank reticence. That suggests greater policy visibility will come in the autumn, with the bank being likely to limit expectations of additional expansion.” 

“The bank appears likely to avoid a return to negative rates, even though central bank Governor Ohlsson has acknowledged that it is not impossible to consider negative rates. With key trading partner Germany set to benefit from fiscal expansion, we maintain a continued bias towards SEK gains into year-end, although we would be unsurprised if there was modest consolidation first.”