SEB Lowers EUR/SEK & USD/SEK Forecasts

SEB note that "the sharp fall in global interest rates have almost eliminated the negative carry for the SEK against most currencies and in particular the USD. Indeed, the SEK has recovered significantly in recent months and since the beginning of this year the SEK has in fact appreciated against all of the 21 currencies included in the KIX index. Nonetheless, it still trades at what we assess to be undervalued levels against several key currencies like the euro and the dollar, suggesting there is still plenty of room for further appreciation before the SEK is back at more long-term reasonable levels. With the headwinds from low Swedish interest rates gone and unlikely to return, and the fact that the negative impact on the Swedish economy from COVID-19 might be smaller than for countries that had a complete lockdown earlier this year, it seems like conditions are in place for a more sustained recovery for the SEK. Indeed, the speed of the SEK-appreciation this summer has surprised us, but the direction going forward is undisputable and we therefore revise our forecasts and now see the EUR/SEK falling to SEK10.15 by the end of Q3, then to SEK10.00 by year-end. Furthermore, we now expect the EUR/SEK to fall below SEK10.00 in H1 next year. The USD/SEK forecast is revised to SEK8.60 by the end of Q3 and to SEK8.35 by the end of this year."