Buy the dips in EUR/SEK in the near term – Danske Bank

Strategists at Danske Bank recommended buying the dips in the cross in the next 3-6 month.

Key Quotes

“We look for a wider range in EUR/SEK over the summer, which we addressed in a sold strangle recommendation”.

“While we did argue for a temporary dip in EUR/SEK as inflation appeared set to meet and even breach the Riksbank’s expectations for a couple of months yet, this is not the case anymore. After the Riksbank raised its CPIF forecast in July, it effectively opened the door for inflation disappointments instead”.

“We still think the Riksbank will postpone the first hike beyond 2018 and that this will weigh on the SEK later in H2. Hence, in a 3-6M perspective, the cross is primarily a buy on dips in our view”.

“Apart from monetary policy, the slowing housing market domestically and the trade war globally are two other headwinds for the SEK. Cheap valuation fundamentally could be seen as a SEK-buying argument though for those with a longer term horizon. On balance, we set our 1M and 3M forecasts at 10.40 (previously 10.20), 6M to 10.50 (previously 10.40) and leave our 12M forecast at 10.20”.