Swedish Krona: Forecasts turned cautious – Nordea
Nordea strategists concede their long‑standing positive view on the Swedish Krona (SEK) has not materialized and now adopt an agnostic stance. SEK has been hurt by Middle East‑related risk‑off flows, US tech outperformance, Riksbank policy lagging the ECB, and the "Scandie trade" favouring NOK. They say SEK strength requires lower Oil prices, easing inflation and lower global short rates.
Nordea strategists have revised their outlook on the Swedish Krona, moving from a positive to an agnostic stance. The SEK has been negatively impacted by Middle East-related risk-off flows, US tech outperformance, Riksbank policy lagging behind the ECB, and the Scandie trade favoring the Norwegian Krone. The strategists believe that the SEK strength requires lower oil prices, easing inflation, and lower global short rates.
Notably, the Riksbank's policy rate is currently 75 basis points behind the ECB, a significant divergence never seen before. Currently, the SEK functions as a funding currency. Furthermore, the Krona has been weakened by the Scandie trade, with the NOK benefiting from higher energy prices and a policy rate that is 275 basis points higher than the Riksbank's.
For the SEK to regain strength, a drop in oil prices, easing inflationary pressures, and lower global short rates are necessary.
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