The Swedish krona has depreciated by almost 5% against the euro since the beginning of June, and there are several reasons for this, says Commerzbank FX analyst Antje Praefcke.
Riksbank will continue to maintain its moderate stance
“Although it kept the key interest rate unchanged at 3.75%, the Riksbank’s June interest rate decision left a dovish taste. Instead of two rate cuts, it now sees the possibility of three rate cuts by the end of the year. The market has gone even further and its expectations for this year are even lower than those of the Riksbank.”
“The Riksbank’s dovish stance set the stage for krona weakness from June onwards. Inflation data for June surprised on the downside. This was followed by a significant increase in risk aversion in the market, which regularly leads to sharp losses in Scandinavian currencies. And the bad news continues: the GDP indicator for the second quarter shows a 0.8% drop in activity compared to the first.”
“It is therefore not surprising that the market is currently keeping its hands off the krone and that it has little chance of a significant recovery. After all, the Riksbank lowered its forecast for the key interest rate in June precisely because of the favourable inflation trend and lower economic activity. The Riksbank is also unlikely to abandon its dovish stance in August. This will also make it difficult for the krone to significantly correct its summer losses.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
