SEK still appears somewhat uncertain in the short term, according to analysis from ING ahead of the Riksbank’s monetary policy announcement today.
The Riksbank is anticipated to resist any inclination towards a dovish stance. Both consensus and market sentiment suggest an expectation for the central bank to maintain the status quo without any policy adjustments.
ING forecasts suggest that the Riksbank might adjust its projection for the average rate in the second quarter of 2024 to 3.95%, with a year-end value around 3.50%. While this adjustment implies the possibility of a rate cut in the first half of the year, it is not considered a definite decision.
The message from the Riksbank is expected to emphasize its dependence on economic data for policy decisions. This stance could serve as a moderate pushback against market expectations of rate cuts in May or June. However, given the current soft momentum of the SEK and the mere indication of potential rate cuts in the first half of the year, markets may still hold onto some expectations for a move in May.
In terms of currency pairs, EUR/SEK may face upward pressure, possibly reaching levels around 11.50-11.55 in the short term. Nonetheless, there is optimism for a sustained downward movement in the EUR/SEK pair as early as April.
