SEK set to appreciate vs EUR on improved exports to euro area

Rate markets have not fully ruled out the possibility that the Riksbank could further easemonetary policy in order to uphold its 2% inflation target. Further easing this year wouldfollow the surprise move in March to cut the repo rate to -0.25% and increase governmentbond buying to SEK 30bn. 

Although not its primary goal, there is little doubt that the central bank favors a weaker SEK against the EUR. Such an outcome, however, is unlikely to be achieved without sustained direct intervention in the exchange rate given the size of the ECB's QE programme. 

While a policy option, analysts believe it would prove too costly for the central bank. In the absence of this, the SEK is expected to appreciate against the EUR by year end, propped up by improved exports to the euro area, as economic conditions in the single currency area slowly improve. 

Lloyds Bank forecasts EUR/SEK at 9.0 at end 2015 and 8.9 at end 2016.