EUR/SEK: The cyclical backdrop remains a headwind for the Krona – Danske Bank

EUR/SEK and USD/SEK have rebounded sharply year-to-date. Economists at Danske Bank analyze Krona’s outlook.

SEK to weaken on the back of cyclical backdrop, relative central bank pricing and structural flows outlook

The cyclical backdrop remains a headwind for the SEK in our view amid subpar and even recession-like European growth outlook. 

The Swedish economy, which entered recession in Q3 2023, is set to pick up even as domestic demand and the housing market are stagnant.

The Riksbank will not lag the ECB – and the Fed will not significantly lead other central banks – in the easing cycle. This leaves the SEK in a vulnerable position from a rates perspective, too. 

Structural flows remain a headwind for the SEK. 

We target the EUR/SEK at 11.60 in 6-12 months.