As broadly expected, the Riksbank hiked its policy rate by 50 bps to 3.00%. Hawkish surprise in the form of active QT motivated to strengthen the SEK, economists at Danske Bank report.

U-turn on SEK

“From the last year’s outright neglect, the Riksbank now re-establishes and emphasizes, the inflation-SEK link. The RB explicitly states that a stronger SEK will help push inflation lower. And not only that, it actually surprises with active QT and specifically links that to the SEK. To us, this clearly states that the SEK is much higher on the Board’s priority list than previously, which should lend support for the SEK.” 

“The initial reaction, ten figures lower EUR/SEK, makes sense and we can easily see continued selling down toward or short-term 11.10 target.”

“This new, more FX-caring monetary policy could have a chance to stabilise the SEK given the positive signaling effect, but in order to get a follow through it must be bolstered by real flows.”