EUR/SEK likely to trade around 9.80 by end-2018 – Lloyds Bank

Price movements in EUR/SEK seem to be re-aligning with the fundamentals. After reaching 10.70 in early May, the EUR/SEK pair has dropped sharply towards 10.20, noted Lloyds Bank. The Swedish economy continues to be among the better performing developed market economies, with the first quarter GDP growth expanding to 3.3 percent year-on-year.

Even if inflation has decelerated in recent months, there is still a reasonable case for the Swedish central bank to move interest rates higher and it anticipates to do so by the end of 2018. On the contrary, European economic data underperformed expectations through the initial three months of 2018, although the dip is believed to be weather related. The ECB is expected to end its QE programme by the end of this year and possibly tighten policy rates in 2019. But the risks to the outlook are tilted to the downside, especially if there is no bounce seen in European economic activity that is expected to be seen in Q2.

“All considered, we forecast EUR/SEK at 9.80 for end-2018”, added Lloyds Bank.