EUR/SEK Outlook:
The EUR/SEK is currently near its 3-month average and trading at 30-day highs, which suggests it may move sideways in the near term. ING Bank sees limited downside room in the next few months due to stretched valuation, but still expect a move to 10.30 by year-end due to Sweden's strong growth outlook and no Riksbank rate cuts.
Key drivers:
• Rate gap: The European Central Bank is maintaining a more cautious approach compared to the Riksbank, which supports SEK.
• Risk/commodities: With oil prices at 90-day highs, the strength of the SEK can be affected as high energy costs can pressure Sweden's economy.
• Macro factor: The Eurozone's January unemployment rate is expected to hold at a record low, which may support the EUR.
Range:
EUR/SEK is likely to hold around current levels, given its recent stability within a 4.3% trading range.
What could change it:
• Upside risk: A surprising spike in Eurozone economic indicators could strengthen the EUR.
• Downside risk: A significant drop in oil prices may create headwinds for the SEK and affect the overall exchange rate.
