The krona has continued to weaken over the past month resulting in EUR/SEK hitting an intra-day high of 10.740 in June. As economists at MUFG Bank note, global growth concerns offset support from a hawkish Riksbank.
Global growth concerns dampen upside for SEK
“The krona has been undermined over the past month by building fears over a sharper slowdown in global growth. As a small and open economy, Sweden’s economy and the krona are more sensitive to the outlook for global growth.”
“The negative external environment has outweighed support from domestic developments. The Riksbank plans to raise the policy rate to close to 2.00% at the start of next year, and will speed up balance sheet shrinkage during the 2H of this year by allowing around SEK28 billion of maturing QE holdings to roll off without replacing.”
“The shift to tighter monetary policy should provide more support for the krona but only when growth concerns ease. In the near-term though growth concerns keep risks titled to the downside for the krona.”