Key Moments
- Nordea strategists continue to view the Swedish Krona as undervalued, supported by solid domestic fundamentals and improving macroeconomic data.
- They see scope for Riksbank rate hikes to aid SEK through tighter rate differentials, while warning that overall upside potential has become more constrained.
- Strategists highlight fading SEK momentum into 2025-2026, a more hawkish Fed, Middle East risks and EUR/USD dependency as key factors tempering their optimism.
Nordea’s Updated View on SEK Valuation
Nordea strategists maintain a constructive stance on the Swedish Krona (SEK), arguing that the currency remains undervalued in light of Sweden’s domestic backdrop. They point to strong local fundamentals and an improving macroeconomic picture as reasons to expect a gradual firming of SEK over their forecast period.
While the bank still anticipates appreciation over time, its tone on the currency has turned more cautious. Strategists acknowledge that the earlier strength in SEK prospects has weakened when looking toward 2025 and into early 2026.
Moderating Bullishness and Shifting Momentum
Nordea notes that several factors are weighing on the earlier, more optimistic outlook for SEK. These include a loss of momentum projected for 2025 and the beginning of 2026, a more hawkish Federal Reserve (Fed), geopolitical uncertainty in the Middle East, and SEK’s sensitivity to stability in EUR/USD.
As a result, the bank now sees less room for significant further gains, even though it still considers the currency undervalued. Upside is viewed as more constrained than before, with external conditions and cross-asset dynamics playing an increasingly important role.
Riksbank Policy: Dual-Edged Support for SEK
Nordea highlights the potential impact of Riksbank policy decisions on SEK. The strategists point out that recent developments in underlying inflation could push the central bank toward initiating rate hikes, which would have mixed implications for the currency.
The analysis describes higher policy rates as a double-edged factor. On one side, tighter policy can weigh on Sweden’s growth outlook; on the other, it can help narrow the interest rate gap versus the European Central Bank (ECB), which may be supportive for SEK.
For now, Nordea considers the relative rate differential effect to be more influential for the currency than growth concerns. The strategists also warn that if the Riksbank fails to meet market expectations for 1-2 hikes by year-end, there is a risk that EUR/SEK could drift higher.
Market Conditions and Capital Flows
According to Nordea, broader market conditions currently favor Sweden as an investment destination. They cite a supportive combination of strong global risk appetite, subdued volatility, and constructive domestic factors as elements that could help attract foreign capital into Swedish assets.
SEK Outlook and Policy Drivers – Summary Table
| Factor | Nordea’s Assessment | Implication for SEK |
|---|---|---|
| Valuation | Remains “undervalued” with improved macroeconomic scorecard | Supports gradual appreciation over the forecast horizon |
| 2025 – early 2026 momentum | Momentum has subsided | Less bullish stance on SEK than previously |
| Riksbank rate path | Possibility of first rate hike as inflation momentum picks up | Narrows rate differential vs ECB but may weigh on growth |
| Market expectations | 1-2 Riksbank hikes anticipated until year-end | Risk of EUR/SEK moving higher if expectations are not met |
| Global backdrop | Healthy risk appetite and low volatility | Improves Sweden’s attractiveness for foreign capital |
| External risks | More hawkish Fed, Middle East uncertainty, EUR/USD dependence | Contributes to more limited upside for SEK |
Original Strategist Commentary
“The Swedish krona remains “undervalued” according to our view and we expect the improved macro economic score card to gradually appreciate the SEK over the forecast horizon.”
“However, we recognize that the 2025 and early 2026 momentum have subsided, and we are less bullish on the SEK than before.”
“Ready, steady, hike? Momentum in underlying inflation has picked up and might potentially force the Riksbank’s hand to deliver its first rate hike. A higher policy rate is a two-sided coin for the SEK; it dampens economic growth potential, but also narrows the policy rate differential compared to the ECB.”
“For the time being, we believe the latter argument is of greater importance, with the risk of EUR/SEK edging higher if the Riksbank does not adhere to market expectations of 1-2 hikes until year-end.”
“Healthy global risk appetite with low volatility, coupled with favorable domestic conditions, makes Sweden well positioned to attract foreign capital.”
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
