EUR/SEK Outlook:
EUR/SEK is slightly positive but likely to move sideways as it is close to its recent average and within a stable range. ING Bank sees limited downside room in the next few months for EUR/SEK due to stretched valuation, but still expect a move to 10.30 by year-end based on Sweden's attractive growth/fiscal profile and no Riksbank cuts.
Key drivers:
• Rate gap: The European Central Bank is expected to keep interest rates on hold, which could limit the euro's upside potential.
• Risk/commodities: With oil prices at 90-day highs, this can impact the SEK as higher oil prices generally strengthen currencies of oil-importing nations.
• Macro factor: Anticipated modest cooling in Germany’s CPI might weigh on the euro's performance in the near term.
Range:
Expect EUR/SEK to test extremes while remaining within its recent 4.4% range.
What could change it:
• Upside risk: A surprise increase in Eurozone inflation could strengthen the euro.
• Downside risk: A significant drop in oil prices could negatively impact the SEK.