Gains in EUR/SEK over February and March signal that markets have priced a good deal of geopolitical risk out of the krona. The recent SEK moves have also been driven by a fierce hawkish re-pricing of Riksbank’s rate expectations. In the view of economists at ING, SEK's rally could pause soon.

End of the run?

“While markets appear quite comfortable for now with their optimistic stance on an eventual military de-escalation in Ukraine, their hawkish pricing for multiple hikes in 2022 by the Riksbank may fail to be met by a similar hawkish tone from the Riksbank.”

“In a still quite volatile environment for the pair, we think the risks are skewed to the upside for EUR/SEK as some hawkish expectations on Riksbank tightening may have to be scaled back in the coming weeks.”