Swedish Krona: Outlook Turns Cautious — Nordea

Nordea's strategist team said in its latest update that it has abandoned its long-standing bullish view on the Swedish krona, shifting to a neutral stance. The strategists admitted that previous positive expectations had not materialized, and the Swedish krona now faces multiple structural headwinds.

**Multiple factors weighing on the krona**

The strategists noted that safe-haven capital flows triggered by Middle East tensions, better-than-expected performance of U.S. tech stocks, and the Swedish central bank's monetary policy lagging behind the European Central Bank have jointly weighed on the Swedish krona's exchange rate. In addition, market funds have shown a preference for the Norwegian krone among Scandinavian currencies—a trading tendency dubbed the "Scandie trade"—which has also put pressure on the Swedish krona. Market sources indicate that Nordea economists had previously flagged the potential depreciation pressure on the krona from a strong U.S. dollar and low inflation readings.

**Krona strength requires supportive macro conditions**

The institution believes that for the Swedish krona to achieve a sustained trend of appreciation, multiple conditions would need to align, including lower oil prices, further easing of inflation, and a decline in global short-term interest rates. Until then, the krona's upside potential is expected to remain limited. As of the time of writing, the dollar traded near 9.4407 against the Norwegian krone, with Scandinavian currencies overall still driven by external risk sentiment.