- We adjust our EUR/SEK target, stop-loss on market turmoil, Riksbank
- Fundamentally, we are bullish SEK and clients should stay short EUR/SEK
Strategy
On Monday, we recommended clients to sell EUR/SEK. (Danske Bank FX Trading Portfolio – Sell EUR/SEK). Since then EUR/SEK has squeezed higher on global market turmoil. Our base case has been that the Riksbank will stay on hold next week, due to the higher than expected July CPI reading and the weak krona. This remains our base case. However, we acknowledge that the risk has increased that the Riksbank will cut rates on the back of global turmoil and the plunge in energy prices that further challenges the Riksbank's aggressive inflation forecast. A Riksbank rate cut would probably send EUR/SEK higher, as the market is not priced for Riksbank easing. But we think that any EUR/SEK bounce will be temporary. We maintain our medium-term bullish view on the krona, forecasting a gradual move lower in EUR/SEK towards 9.40 in 1M and 3M, 9.30 in 6M and 9.00 in 12M. Therefore, we choose to manage our short position in EUR/SEK by raising the stop to 9.75 (from 9.68), while lowering the target to 9.20 (from 9.30).
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