Risk of further krona weakness
Our call for a relatively weak Swedish GDP number on 29 May does not bode well for Swedish krona over the next couple of weeks. A weak GDP number will come in the aftermath of the surprisingly low Swedish inflation numbers for April and the weaker risk sentiment that has prevailed since Bernanke this week talked about tapering down the current QE programme.
We have not changed our medium- to long-term positive view on the SEK but for the next couple of weeks the above-mentioned events are likely to strengthen calls for a new rate cut from the Riksbank in July. Currently, some14bp is priced in the market for a rate cut in July. We would not be surprised to see the probability moving higher, thereby weighing on the SEK. A move higher towards 8.72 or even higher in EUR/SEK looks likely.
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Danske Bank