SEK looks increasingly attractive – Danske Bank

Michael Gahr, Senior Analyst at Danske Bank, sees the Swedish Krona’s outlook as positive.

Key Quotes

“The SEK is trading on the defensive despite rather upbeat soft and hard macro data: most recently, PMIs, orders and production data and before that an upside surprise in inflation and rising inflation expectations. As a result, EUR/SEK has diverged from our six-month (12-month) rolling rate-spread model, which has the fair value at 9.50 (9.40)”.

“Part of the reason could be second-round effects from dovish ECB communication, although it does not rhyme with how relative yields have performed. The same applies for the relatively low three-year wage deal”.

“One could perhaps also blame temporary dividend-related SEK outflows. However, this week there are no significant payouts”.

“Instead, we focus on today's inflation figures where our CPIF forecast is below consensus expectation the Riksbank's forecast. If proven right, EUR/SEK should spike higher, where first resistance is seen around 9.66”.

“This will be the inflation figures that the Riksbank brings to its April meeting, so therefore they are important. After the recent depreciation, the SEK is trading 2.3% weaker than the Riksbank’s forecast. In our view, the SEK is looking increasingly attractive”.