SEK keeps the bearish view for the time being – Danske Bank

Chief Analyst at Danske Bank Arne Rasmussen believes the Swedish Krona is poised for further depreciation in the next months.

Key Quotes

“The sharp drop in EUR/SEK on the back of the GDP numbers yesterday seemed fair in the sense that the outcome was way stronger than both consensus and the Riksbank’s estimates”.

“The Swedish economy performed relatively well in the first half of the year although we do see signs that the housing market is taking its toll on growth and we expect to see more of that in coming quarters”.

“In terms of monetary policy, the strong outcome is less important, even though it is surely welcomed by the Riksbank. Why? Because we know the central bank’s focus is elsewhere. In particular, we note that core inflation undershot its June forecast and as such the case for pricing in more frontloaded rate hikes is weak, in our view”.

“We still do not expect a hike from the Riksbank this year and, on balance, we maintain our bearish view on the SEK, targeting EUR/SEK at 10.40 in 3M”.