Societe Generale notes the Riksbank’s 25bp hike to 2.0% and guidance for further tightening, keeping policy accommodative versus neutral. Updated projections imply more hikes through 2028, narrowing the differential with the ECB. Despite negative carry, SEK has outperformed, with EUR/SEK retreating to its 200-day moving average after September’s peak and further downside risk if support breaks.

Swedish tightening supports Krona

“Elsewhere in G10, the Riksbank followed the RBA yesterday and the BoC last week by delivering a quarter point rate increase to 2.0%. The move was telegraphed at the September meeting. The policy rate remains accommodative relative to the neutral range (mid-point 2.25%) so further tightening could be on the cards.”

“This is also the implicit message in the statement: if the outlook for inflation and economic activity holds, the Riksbank assesses that it is likely that the policy rate will be raised further in the coming year. The path of September still holds and implies tightening to 2.3% in 2027 and 2.5% in 2028.”

“EUR/SEK breached a multi-month ascending trend line and failed to defend the neckline of its previous inverse head and shoulders pattern, highlighting a lack of steady upward momentum. The pair has now reached the 200-DMA and is challenging the August trough at 10.91/10.87, which could act as a potential support zone. A brief bounce cannot be ruled out; however, the recent pivot high at 11.10/11.15 may serve as short-term resistance. An inability to hold above 10.91/10.87 could lead to a deeper decline.”