Krona likely to have little more upside potential given Riksbank's recent dovish stance – Commerzbank

In view of the Riksbank's recent dovish stance, the Swedish Krona (SEK) is likely to have little more upside potential, economists at Commerzbank say.

Riksbank turns dovish

In February, the Riksbank surprised with the statement that the key interest rate could be cut significantly earlier, possibly as early as the first half of 2024. It did not want to completely rule out March either, although the hurdles for this are probably high. Although inflationary pressure is actually still too high for this, the Riksbank has become a dove, which we believe was hasty. It could have waited until March when it had more data on inflation and growth. 

Given the Riksbank's recent dovish stance, the Krona is likely to have little upside potential. If the Riksbank gives the impression in March that it is not sufficiently combating inflation risks, this would be fatal for the Krona.