Krona should gain ground against the euro over the coming months – Commerzbank
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Sweden’s Riksbank raised rates 100 bps with warnings of further hikes. However, the day ended disappointingly for SEK as it was unable to benefit. In the view of economists at Commerzbank, the market reaction is exaggerated.
“The Riksbank hiked the key rate by 100 bps to now 1.75% and signalled further rate hikes for the coming six months. The Riksbank raised its inflation projections significantly, which was overdue though since rates had always surprised on the upside since June.”
“The market should see it positively that the Riksbank is taking decisive action against inflation. Moreover, it seems sensible to be cautious regarding the GDP projections for 2023 in view of a looming energy crisis over the winter.”
“Contrary to the Riksbank the ECB does not expect a fall in activity, which is likely to turn out to be an overly optimistic view and lead to a pause in the ECB’s rate cycle next year. The Riksbank on the other hand is considering weakening growth in its rate projections. For that reason, SEK should gain ground against the euro over the coming months, even if it is going to do so from weaker levels as the negative sentiment on the markets is currently putting considerable pressure on SEK.”
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