The krona has been the worst performing G10 currency after the Japanese yen since the start of the year. Economists at ING expect the EUR/SEK pair to extend its grind higher as European growth worries mount.

The krona’s recovery is delayed again

“Given SEK’s high sensitivity to Europe’s growth outlook, we forecast EUR/SEK at 10.60 in 4Q22.”

“In the coming weeks, the balance of risks remains tilted to the upside, and a further deterioration in risk sentiment could prompt a re-test of July’s recent high (10.78) and potentially March’s highs (10.86).”

“In 2023, some improvement in the eurozone’s story and the end of global tightening cycles should help pro-cyclical currencies, including SEK, to re-appreciate. A calmer market environment may also revamp the search for carry and allow SEK to benefit from its relatively more attractive rate profile compared to EUR.”

“We expect a gradual return to 10.00 over the course of 2023, although geopolitical and energy-related developments do pose non-negligible risks to this profile.”