Having cut rates for the first time in about eight years in early May, the market is prepared for the Riksbank to announce another 25 bps of easing at tomorrow’s policy meeting. The results of the Bloomberg survey of economists show that this expectation is unanimous amongst the nineteen participants, Senior FX Strategist Jane Foley notes.

EUR/SEK is currently trading close to its average level

“Rate cut hopes have been cemented both by the outcome of last week’s Swedish CPI inflation report and by the guidance provided by the Riksbank at its last policy meeting in June. EUR/SEK is currently trading close to its average level for the past year. That said, although the SEK has clawed back some ground vs. the EUR relative to its Sept 2023 low, it remains weak when viewed from a historical perspective.”

“The softness of the exchange rate means that policymakers are likely keeping a close eye on the probable policy decisions by both the ECB and the Fed this year and their respective impacts on the FX market. In our view, the vulnerability of the SEK limits the likelihood of the Riksbank announcing a 50-bps rate cut this week.”