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Swedish krona likely to continue to strengthen against euro, EUR/SEK to trade around 9.65 by end-2019

In recent weeks, the EUR/SEK pair drifted back to 10.40 after having appreciated to multi-year high in late August. Meanwhile, political turbulence in the euro area has pressured the euro. German regional elections indicated a further shift away from the centrist parties, while Italy continues to be at loggerheads with the EU over its proposed budget.

In a post-meeting press conference of October, after the ECB’s decision to leave policy rates unchanged, President Draghi was careful not to tread into political territory but reaffirmed the expectation that the central bank will end its asset purchase program in December ad hike rates next year, noted Lloyds Bank.

Meanwhile, a slightly more positive message from the Swedish central bank has underpinned the krona. Governor Ingves reiterated that a tightening in policy is expected to take place in either “December or February”.

“With inflation rising to 2.3 percent y/y in September, it seems the market is expecting a rate hike will come sooner rather than later. We expect the krona to continue to strengthen against the euro, to 9.65 at end-2019”, added Lloyds Bank.

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