USD/SEK Outlook:
The USD/SEK remains slightly positive as it trades just above its 3-month average and is near recent highs. This trend is supported by rising demand for the US dollar as a safe-haven asset due to escalating tensions in the Middle East. ING Bank view: USD/SEK should continue to have larger downside potential in line with our bearish USD view: we target a drop below 8.50 this year.
Key drivers:
• Rate gap: The US Federal Reserve's stance on interest rates continues to be more hawkish compared to Sweden’s central bank, which supports the dollar.
• Risk/commodities: Rising tensions have increased oil volatility, impacting currencies heavily tied to energy prices like SEK.
• Macro factor: Ongoing conflicts in the Middle East elevate the USD's safe-haven appeal.
Range:
Expect USD/SEK to hold within its recent range, possibly testing the higher levels as developments unfold.
What could change it:
• Upside risk: A significant escalation in Middle East tensions could further boost demand for the USD.
• Downside risk: Any signs of easing conflict may weaken the dollar's safe-haven allure.
