As the war continues to have adverse growth implications for Swedish growth, risks rise that markets will unwind the currently very hawkish priced-in monetary policy expectations. Analysts at Credit Suisse are therefore now bearish on the Swedish krona and target 10.80 in EUR/SEK.

NOK/SEK upside potential still intact towards 1.10

“We expect SEK price action to remain a factor of the external risk environment in the near-term. In the medium-term, markets could focus on the local growth story, but we believe the deteriorating growth outlook increases risks of a rapid pullback in priced-in monetary policy expectations. As such, both the external and the internal story look unsupportive for the currency, and we therefore now target EUR/SEK at 10.80.”

“We acknowledge that the ECB is dealing with a similar outlook as the Riksbank, and similar tightening timelines may cap upside in EUR/SEK. As such, we prefer to express our views through NOK/SEK upside, based on the two countries’ divergent monetary policies and terms of trade.” 

“We had targeted 1.1450 in NOK/SEK, but with the cross now having shed all of its post-invasion gains, and Brent crude 25% off last week’s high, we think NOK/SEK upside potential is more limited, likely to 1.10 levels.”