SEK likely to strengthen gradually in months ahead, EUR/SEK to trade around 9.2 by end-2017

The Swedish krona has consolidated in a comparatively narrow range between 9.70 and 9.80 against the euro in the past month. Riksbank’s surprise decision in April to extend its quantitative easing program to the end of this year, albeit halving  the monthly rate of asset purchases in the second half of the year, came against the backdrop of volatile inflation readings and uncertainty in Europe, noted Lloyds Bank in a research report.

However, additional easing of monetary policy over and above this is unlikely. To a greater extent, Emmanuel Macron’s performance in the French presidential and legislative elections has lowered the political uncertainty in Europe. Moreover, keeping inflation aside, the Swedish economy continues to perform well.

Household consumption continues to be strong, while manufacturing and services PMI are solid. Furthermore, the SEK is believed to be considerably undervalued on a fundamental basis. Therefore, a gradual strengthening is likely in the months ahead, with EUR/SEK falling to 9.2 by the end of 2017, added Lloyds Bank.