EUR/SEK: Target at 9.30 in 1 month, 9.00 in 12M -  Danske

According to analysts from Danske Bank, the downside potential in the EUR/SEK pair is limited as long as Riksbank continues to guard premature SEK appreciation.

Key Quotes:

“Risk appetite will affect the cross near term, while the macro backdrop is SEK supportive. We target EUR/SEK at 9.30 in 1M, 9.20 in 3M, 9.10 in 6M and 9.00 in 12M.”

“We think that monetary policy will be rather boring for the next few months, with inflation expected to come in close to the Riksbank forecast at least until September and with no ‘news’ from the ECB. That said, both the inflation outlook (Riksbank too optimistic in our view) and the ECB (we expect QE extension beyond Q1 17) suggest the Riksbank is closer to easing monetary policy further than tightening. Our base case is that the Riksbank has finished easing.”

“EUR/SEK has traded closely with risk sentiment recently ahead of the UK referendum. The macro backdrop and fundamental valuation models remain highly supportive for the SEK. However, as long as the Riksbank is guarding against ‘premature’ SEK appreciation, we think the downside potential in EUR/SEK is limited. Also risk aversion in a broader sense (e.g. global growth and stock market valuation concerns) is SEK negative.”