SEK: The preferred channel of better European sentiment - ING

The Swedish krona continues to markedly outperform its G10 peers, as SEK appears the preferred way to play market optimism on a Ukraine-Russia peace deal and the boost in EU spending. Crucially, SEK is a high-beta currency for eurozone sentiment, and the rally in European equities is adding fuel to the krona's rally this week, ING's FX analyst Francesco Pesole notes.

EUR/SEK to stay above 11.00 this summer

"EUR/SEK is now trading close to the key 11.00 support. In the near term, a break lower is more likely than not, especially as we expect the ECB reiterate a dovish stance on Thursday and Sweden's inflation data (also released on Thursday) are expected to show a pickup in CPIF inflation that should keep Riksbank easing expectations in check."

"Beyond the short term, we are not convinced of lasting SEK strength. We expect US tariffs in April to weigh on European sentiment, and a correction in equities should hit SEK more than the euro. Incidentally, markets may be close to peak optimism on Russia-Ukraine, and a suboptimal truce for Ukraine and the EU would weigh on SEK. We continue to favour EUR/SEK staying above 11.00 this summer."