SEK – Range bound with medium-term upside potential

The krona temporarily recovered in July after its weak performance in June ahead of the Riksbank meeting in early July, and following hawkish signals from the Fed which exerted further pressure on the Swedish currency. However, lately the krona has suffered again, due to disappointing data including the July manufacturing PMI and weak GDP growth in Q2. Nevertheless, we believe Swedish economic growth will increase going forward, as a result of relatively strong domestic demand and positive global economic developments, which must eventually boost export activity and support the krona. However, for now we lack a short-term trigger sufficient to persuade the market to buy SEK. It therefore seems likely EUR/SEK will continue to trade in the upper part of the 8.40-8.80 range. We regard the higher end of the range as a medium-term opportunity to sell EUR/SEK. By year-end we expect EUR/SEK to trade down towards 8.40.

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