EUR/SEK: Running out of steam? - Rabobank

Despite some disappointment in Swedish economic data in recent weeks, Jane Foley, Senior FX Strategist at Rabobank suggests that they would look to sell EUR/SEK on rallies towards EUR/SEK9.80.

Key Quotes

“EUR/SEK has been trading in a consolidation phase since the middle of May.  The better tone of the EUR that has dominated the currency pair since early February reflects the broad-based improvement in Eurozone fundamentals and the general rotation back into the EUR.”

“We do not expect the Riksbank to extend its QE policy any further year, though the forward guidance that the repo rate will be held at -0.5% until mid-2018 may to be maintained.  The Riksbank will be wary about the impact of its policy decision on the value of EUR/SEK and is likely to prefer to keep the direction of its policy settings broadly in kilter with those of the ECB. The next Riksbank policy meeting is scheduled for July 4.”

“While the broad-based rotation back in the EUR lifted EUR/SEK during the spring, this rally appears to have run of steam.  In view of the strength of Swedish fundamentals we would look to sell EUR/SEK at rallies to the 9.80 level.  Although we see scope for some further consolidation around current levels on a 1 to 3 month view we expect EUR/SEK to trend towards 9.60 by year end.”