EUR/SEK: Riksbank tightening expectations to support krona momentum – CIBC

The Swedish krona has proven to be a material outperformer over the last month. Economists at CIBC Capital Markets expect the SEK to enjoy further gains ahead as the Riksbank is set to start tightening.

Ongoing real estate concerns also justifies Riskbank’s action

“From pricing rates remaining on hold as recently as three months ago, the market has now moved to price in almost 40bps of tightening in the course of the next 12 months.”

“The Swedish CPI is now expected to remain above 2% in 2022, up from previous median assumptions of prices at 1.6%. That will help validate the need for the Riksbank to act soon, supporting additional SEK gains.”

“With home price growth remaining in excess of 10%, the central bank will remain mindful of rising financial sector imbalances, underlining the need for a modest tightening bias, and supporting further SEK gains.”