Swedish Krona: SEK resilience under Iran risk – Commerzbank

Commerzbank’s Antje Praefcke highlights Riksbank member Per Jansson’s argument that weaker demand, higher policy rates and softer inflation allow Sweden to wait and see despite the Iran-related energy shock. She sees limited need for repricing, little downside for the Krona on a conflict resolution, and expects SEK to defend recent gains and trend slightly stronger versus the Euro.

Limited downside seen for krona

"Certainly, some correction in the SEK is possible should a solution be found to the Iran conflict. Nevertheless, Sweden stands out from many other countries: falling and very low inflation rates in recent months have not led to a significant rise in expectations of interest rate hikes - the market only sees a possibility, starting in the fall, that the Riksbank might raise the policy rate before the end of the year."

"Accordingly, I see little need for a correction and thus little downside potential for the krona in the event of a resolution to the Iran conflict (with falling energy prices); after all, there is almost nothing to price out."

"The economy remains relatively resilient, and the comparatively high real interest rate should also support the krona. While the krona has likely already realized most of its appreciation potential, it should continue to defend these gains against the euro and trend slightly stronger over the course of the year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)