Riksbank will remain dovish – ING

Sweden’s Riksbank is widely expected to cut rates by another 25bp today, notes Francesco Pesole, ING’s currency strategist.

SEK to remain more sensitive to external factors

“The Riksbank is expected to cut rates by a further 25bp today. Governor Erik Thedeen and his colleagues have provided markets with fairly explicit forward guidance, signaling three rate cuts by the end of the year.”

“Despite some modest speculation for a 50 basis point cut at one of these meetings, we believe signs of stabilization in Sweden’s economic outlook should discourage moves of more than 25 basis points. Markets are pricing in 25bp today and likely a reiteration of the recent commitment to continue cutting this year.”

“Ultimately, the SEK should remain more sensitive to external factors as the rate cut cycle is assessed and the Riksbank appears on a stable and predictable path. EUR/SEK may remain under some pressure and test 11.20 in the short term.”