USD/SEK Outlook:
The USD/SEK exchange rate is currently just below its recent average and has traded in a stable range, suggesting it is likely to move sideways. This aligns with the ING Bank view that USD/SEK is anticipated to have larger downside potential in line with a bearish USD outlook.
Key drivers:
• Rate gap: The interest rate differential between the Federal Reserve and the Riksbank is narrowing, placing pressure on the SEK relative to the USD.
• Risk/commodities: Recent geopolitical tensions have supported the USD as a safe-haven asset, maintaining upward pressure on its value.
• One macro factor: The Riksbank’s concern about disinflation may prompt rate cuts that could weaken the SEK further.
Range:
Expect USD/SEK to remain within its recent range, with no significant movement expected in either direction.
What could change it:
• Upside risk: Stronger-than-expected U.S. economic data could support further USD strength.
• Downside risk: Any indication of aggressive rate cuts by the Riksbank could lead to further SEK weakness.
