Brown Brothers Harriman’s (BBH) Elias Haddad reports that the USD/SEK currency pair has declined, primarily due to broad-based weakness in the US Dollar and a deeper-than-anticipated disinflation in Sweden for April. This unexpected disinflation has led to a reduction in market expectations for further rate hikes by the Riksbank, Sweden’s central bank, as reflected in the swaps curve, which has shifted lower and is now more closely aligned with the Riksbank’s projected policy rate path [1].
According to the March Monetary Policy Report, the Riksbank anticipates maintaining the policy rate at 1.75% until the fourth quarter of 2026, with a potential 25 basis point increase to 2.00% projected for the first quarter of 2028 [1]. The Riksbank is widely expected to keep the policy rate unchanged at 1.75% for a fifth consecutive meeting, with the decision scheduled for tomorrow [1].
Despite the deepening disinflation, Haddad emphasizes that positive real rates continue to provide support for the Swedish Krona (SEK), suggesting a constructive outlook for the currency in the current environment [1].
CONCLUSION
The Swedish Krona remains supported by positive real rates, even as deeper-than-expected disinflation in April has reduced expectations for further Riksbank rate hikes. Market participants anticipate the policy rate will remain on hold, aligning with the central bank’s projections and supporting SEK’s outlook.