Inflation concerns and a lack of future scheduled meetings point to a 50 bps hike from the Riksbank. However, any benefits for SEK may only show up at a later stage due to the current unstable risk environment, in the view of economists at ING.

Krona should struggle to stage a sustained rebound in the near term

“A weaker krona, above-expectation inflation readings, and a lack of scheduled meetings later this year, mean a 50 bps rate hike from the Riksbank this Thursday looks highly likely.”

“The environment for global equities is likely to remain challenging due to the combination of global slowdown fears and tighter monetary conditions, and the relatively illiquid (to other G10 FX) and high-beta krona should in our view struggle to stage a sustained rebound in the near term.”

“We'll need to wait for a considerable stabilisation in global risk sentiment (that may only happen in 4Q) to see EUR/SEK re-connect with its rates differential, which unmistakenly argues for a weakening of the exchange rate.”

“We still don't exclude a return to 10.10-10.20 by the end of this year, with the Riksbank's policy being a major driver of SEK restrengthening.”