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Swedish Krona to Remain Pressured by Global Rates, UBS Forecasts
Summary
UBS analysts maintain their forecast for a weaker Swedish krona, citing that global interest rate dynamics and expected Federal Reserve tightening are overshadowing supportive domestic fundamentals.
The Swedish krona is expected to remain under pressure from global interest rate dynamics, overriding supportive domestic economic conditions, according to a new analysis from UBS Switzerland AG. The bank maintained its forecast for the EUR/SEK exchange rate to stand at 11.00 by December 2026.
Global Factors Outweigh Domestic Strength
Strategists at UBS argue that the krona's performance is primarily being dictated by external forces rather than Sweden's own economic picture. In a note, analysts Clémence Dumoncel and Constantin Bolz highlighted that factors such as elevated energy prices, Sweden's relatively low interest rates, and expectations for further monetary tightening by the U.S. Federal Reserve continue to weigh on the currency.
This dynamic persists even after Sweden's central bank, the Riksbank, adopted a more hawkish tone at its September meeting. The Riksbank held its policy rate at 1.75% but saw a limited market reaction, as the shift in communication was largely anticipated by investors.
Divergent Central Bank Paths
UBS sees little domestic justification for the Riksbank to pursue additional rate hikes, citing contained underlying inflation and slack in the labor market. The bank projects the Riksbank will remain on hold through the end of the year, a period during which the European Central Bank is likely to raise its own rates again in December.
AdThis monetary policy divergence is a key headwind for the krona. According to the report, a more supportive environment for the currency would require markets to fully price out further rate increases from the Federal Reserve, which would ease the pressure on lower-yielding currencies.
Forecast and Key Levels
UBS reaffirmed its projections for the EUR/SEK pair, seeing it gradually strengthen over the next year. The bank's forecasts are as follows:
- December 2026: 11.00
- March 2027: 10.90
- June 2027: 10.70
- September 2027: 10.60
The analysts identified a key support level for the currency pair at 11.00, with resistance seen around the 11.50 mark.
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