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Nordea sees SEK as undervalued but upside limited by shifting rates

Nordea flags that a more hawkish Fed and fading inflation momentum could cap further SEK gains into 2025 and 2026, even as potential Riksbank hikes may narrow rate differentials versus the ECB.

Reported · Written up by our desk · EM Currencies

Nordea strategists say the Swedish krona, or SEK, remains undervalued and is supported by solid domestic fundamentals and improving macro data, but they expect its upside to be more limited as 2025 to 2026 progresses.

The bank points to fading momentum in underlying inflation, which it links to the prospect that the Riksbank may act sooner or later on policy. It also says a more hawkish Federal Reserve, along with uncertainty in the Middle East and reliance on EUR/USD stability, are factors weighing on SEK carry potential.

Nordea argues that possible Riksbank hikes could help SEK by narrowing the policy rate differential versus the ECB. At the same time, it warns that a higher policy rate is a two-sided outcome for the currency, as it can dampen growth potential while still reducing the rate gap.

FXStreet’s insights summarize Nordea’s view that while the path for SEK is supported by narrower rate differentials, momentum is weakening and the currency’s upward room may be constrained compared with earlier expectations.

Latest closeEUR/USD 1.153 ▼0.1%

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