Are There More Rate Hikes On Swedish Krona's (SEK) Way?

• The Swedish krona depreciates to multi-month lows vs. euro.
• The Riksbank unexpectedly hiked rates by 100 bps on Tuesday.
• The next up barrier comes at the 2022 highs around 10.90.

The Swedish currency loses further ground vs. the euro and lifts EUR/SEK to new 6-month tops around 10.8500 following the interest rate decision by the Riksbank.

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EUR/SEK stronger on Riksbank dovish hike

EUR/SEK edges higher despite the unexpected full-point interest rate hike by the Riksbank at its meeting earlier on Tuesday.

Indeed, the Scandinavian central bank increased the policy rate to 1.75% (from 0.75%) on the back of rising risks of inflation getting entrenched. In order to bring inflation back to the bank’s target, the Riksbank left the door open to extra rate hikes in the upcoming meetings.

The central bank now sees the policy rate at 2.5% in a year’s time - just a tad higher from the 2.0% announced at the June’s meeting - although with inflation running at 3-decade highs market participants believe rates could most likely be around 3.5% at the end of 2023.

The Riksbank revised its inflation and growth forecasts and now expected the CPIF at 7.8% this year and 5.1% in 2023, while the economy is expected to expand 2.7% in 2022 and contract 0.7% next year.