Improved risk sentiment should support SEK ahead – CIBC

The high beta status of the SEK has done little to protect its value of late. Economists at CIBC Capital Markets expect the EUR/SEK pair to move back lower and dip under 11 in the second half of the year.

More constructive SEK backdrop would help ease inflationary pressures

“A 50 bps hike next month will see the target rate reach 3.00% and levels not seen since Q4 2008. Moreover, in view of CPI having yet to peak, a terminal rate in excess of 3.25% is now being priced in by the market. Part of the reasoning for the higher and later CPI peak comes via the currency, a more constructive SEK backdrop would help ease inflationary pressures and moderate the policy burden on the central bank.”  

“The SEK remains leveraged to both risk and European growth prospects. With the former benefitting from the Chinese re-opening narrative and the retreat in benchmark European gas prices despite domestic risk criteria we would expect graduated SEK gains through 2023.” 

“Q1 2023: 11.15 | Q2 2023: 10.85 (EUR/SEK)”