EUR/SEK seen grinding lower – Danske Bank

Chief Analyst at Danske Bank Allan von Mehren expects the Swedish Krona to gather further traction in the next months.

Key Quotes

“As expected, the Riksbank’s ‘on hold’ decision last week weighed on the cross, sending our short-term interest rate spread model lower as well, now pointing at 9.40 as a fair value”.

“In isolation, this suggests the pair may continue to go lower from here. That said, we are a little concerned that the cross might bounce higher on the back of this week’s August inflation data (due out tomorrow)”.

“The Riksbank expects that inflation will resume the uptrend in coming months. We do not believe this and think it will move sideways around current levels for the rest of the year; hence, the gap versus the Riksbank could gradually increase, which in turn suggests that the Riksbank, like the ECB, will have to extend its QE programme”.