SEK/EUR Outlook:
The SEK/EUR exchange rate is slightly weaker, likely to move sideways as it sits just above its recent average and is near recent lows. The current dynamics do not present a strong driver for significant movement upward or downward.
Key drivers:
- Rate gap: The Riksbank's cautious stance on inflation risks contrasts with the ECB's more stable monetary policy, impacting the SEK's performance against the EUR.
- Risk/commodities: With oil prices at recent highs, there is upward pressure on the Eurozone's inflation outlook, which may indirectly affect the EUR's strength.
- One macro factor: The ECB's accommodation is aimed at managing inflation effectively, which has resulted in mixed responses from the Eurozone’s economic data, including consumer confidence.
Range:
Expect the SEK/EUR to likely hold within its recent range, without testing extremes, as the pressure on both currencies is balanced.
What could change it:
- Upside risk: Any sharp increase in economic growth projections for Sweden could bolster the SEK.
- Downside risk: A stronger-than-expected decline in inflation in Sweden could prompt the Riksbank to consider rate cuts, negatively impacting the SEK.
