The Swedish Krona strengthened on Tuesday as the Norwegian Krone also posted gains. The EUR/SEK exchange rate briefly moved to new highs before reversing around 10.34.
The pair is extremely overbought from a technical perspective and as a result, some kind of correction is probably likely moving forwards.
Risk sentiment was a little more stable in Europe on Tuesday, as Oil prices, in particular, stabilized after heavy losses on Monday.
The Swedish economy is particularly reliant on conditions for global trade, and as a result, the market concern over the trade war between the US and China remains a serious concern and has been part of what is driving EUR/SEK up and up recently.
SEB target 9.80 in Euro/Krona exchange rate
The once encouraging outlook for the Swedish economy has worsened lately, but it was not long ago that the small Nordic economy was posting world-beating growth and demonstrating higher inflationary pressures than many similar developed G10 economies. Forex strategists at SEB fully anticipate that the more negative conditions in Sweden are set to dissipate as inflation in March will be encouraging and the housing market woes are set to slow,
“We have been looking for levels towards 10.35 for some time and we chose to act now that these levels have (nearly) been filled. The grind lower in EUR/SEK will be slow as Swedish equity dividends are still a headwind but the March Swe CPIF numbers next week (2.1% y/y) should ensure a stabilisation and ultimately a reversal of the current uptrend in EUR/SEK. Spot: 10.3150 Stop loss: daily close above 10.55 Initial Target: 9.80”
Ultimately risk conditions are probably going to dictate the direction for the Krona, as while the Riksbank stays resolutely dovish and demonstrates little appetite to tighten policy there may be limited support from interest rates. The stability of the Euro is another obstacle as the common currency appears to be enjoying higher haven status these days, making the pair more volatile than it might have been in the path. While inflation continues to be so stubborn in SEB are clearly betting that the oversold Krona can strengthen if things get a little better.