Swedish Krona: SEK draws support from Riksbank rate hikes – Societe Generale

SEK has outperformed despite negative carry, while EUR/SEK has fallen back to its 200-day moving average from September’s peak and faces further downside risk if support gives way. Societe Generale highlights the Riksbank’s 25bp increase to 2.0% and its guidance signalling additional tightening, although policy remains accommodative relative to neutral. Revised projections point to further rate increases through 2028, reducing the differential with the ECB.

Can Swedish policy tightening underpin further Krona gains?

"Elsewhere in G10, the Riksbank followed the RBA yesterday and the BoC last week by delivering a quarter point rate increase to 2.0%. The move was telegraphed at the September meeting. The policy rate remains accommodative relative to the neutral range (mid-point 2.25%) so further tightening could be on the cards."

"This is also the implicit message in the statement: if the outlook for inflation and economic activity holds, the Riksbank assesses that it is likely that the policy rate will be raised further in the coming year. The path of September still holds and implies tightening to 2.3% in 2027 and 2.5% in 2028."

"EUR/SEK breached a multi-month ascending trend line and failed to defend the neckline of its previous inverse head and shoulders pattern, highlighting a lack of steady upward momentum. The pair has now reached the 200-DMA and is challenging the August trough at 10.91/10.87, which could act as a potential support zone. A brief bounce cannot be ruled out; however, the recent pivot high at 11.10/11.15 may serve as short-term resistance. An inability to hold above 10.91/10.87 could lead to a deeper decline."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)