SEK: Riksbank to cut, but terminal rate close - ING

The Riksbank has already reduced rates by 150bp since last May, and these cuts are starting to show early signs of success, with high-frequency indicators and the housing market having rebounded quite markedly of late, ING's FX analyst Francesco Pesole notes.

EUR/SEK is long due a recovery in volatility

"That said, hard data is lagging and still shows an elevated unemployment rate. When paired with core inflation at target and headline CPIF at 1.5%, the case for another 25bp cut to 2.25% today is strong."

"For the moment, our view is that the Riksbank will stop easing at the 2.0% mark, and that today's policy announcement will give away some hints that the easing cycle is nearing its end. That said, we expect the Riksbank to retain dovish flexibility based on the economic impact of US tariffs, and risks are markedly skewed to more cuts compared to our forecast."

"The ultra-stable EUR/SEK is long due a recovery in volatility, and while today's Riksbank announcement may not be the trigger for that as policymakers may just match market expectations, the mix of equity market risks and US protectionism points to upside potential for the pair. Crucially, we don't think the Riksbank will necessarily show discontent with a weaker krona, as that can help Swedish exporters in a global trade slowdown."