Economists at Riksbank hold on to their EUR/SEK 10.60 target ahead of Thursday’s Riksbank meeting. The risks for EUR/SEK remain biased to the upside, as the bar is likely high for the Riksbank to deliver on market’s very hawkish expectations. 

Jumping through hoops

“We think the Riksbank has to deliver a very hawkish policy mix in tomorrow’s meeting for EUR/SEK downside to materialize. That is, the bank needs to either a) hike rates, or b) signal a front-loaded tightening cycle, featuring a June hike and one or two 50bps rate hikes. We think that it is unlikely that the Riksbank will jump through these hoops in the context of such a mixed local economic backdrop. 

“Sweden remains a country where markets can become sceptical of whether the local backdrop warrants 250bps of tightening, particularly if inflation data ceases to surprise to the upside.” 

“We prefer to hold on to our EUR/SEK 10.60 target.”