Riksbank’s rate expectations are too high in the view of economists at ING. Subsequently, the Swedish krona is set to weaken against both the dollar and the euro as the impact of the Russia-Ukraine conflict also starts to unravel.

Downside risks prevail

“We think that the market’s pricing for 2023-24 (rates to rise to 2.0%+) is overly hawkish, as the tightening cycle in Sweden may peak only at around 0.75-1.0%.”

“The prospect of a Riksbank tightening in 2022 is offering some support to SEK, however, it seems to be embedding too little geopolitical risk and we could see a return to the 9.50/9.70 region in USD/SEK over the coming days as new sanctions against Russia are announced.” 

“Some EUR idiosyncratic weakness means a bit less upside risk in EUR/SEK, but a return to the 10.40 mark is possible.”