EUR/SEK to tick modestly lower medium-term - Rabobank

The Bloomberg survey indicates a unanimous expectation among surveyed economists for a 25 bp rate reduction from the Riksbank at tomorrow's policy meeting. The Reuters survey suggests that the consensus also favours an additional two more 25 bps moves before the end of the year, Rabobank's Senior FX Strategist Jane Foley notes.

SEK appears cheap

"The combination of stimulus from both monetary and fiscal policy has had a clear impact on confidence levels. Although the Swedish economy has been stagnating for several quarters, consumer confidence has been trending higher from its low in late 2022. This week's release is expected to show another incremental improvement."

"It is hoped that this will be reflected in forthcoming retail sales data. In July retail sales rose 0.5% m/m, compared to a drop of -0.8% m/m in June. Other data are also showing signs of improvement. Sweden's manufacturing PMI release rose to a better than expected 52.7 in August, suggesting that signs of recovery were broadening."

"Surveys are also showing signs of optimism regarding the outlook for prices in the hard-hit property sector which are stemming from hopes of lower mortgage rates. That said elevated levels of housing supply are likely to dampen the recovery. From a historical basis the SEK appears cheap. Based on Sweden's improving economic outlook we expect EUR/SEK to tick modestly lower medium-term despite the dovishness of the Riksbank."