The strength of the Swedish Krona (SEK) relies heavily on Sweden’s economy. According to Rabobank’s FX analyst, Sweden is one of the few G10 nations that won’t likely ease central bank policies in the coming year. Rabobank believes the European Central Bank (ECB) has finished cutting rates, even though the market anticipates about 19 basis points of cuts by late next year. In contrast, bigger cuts are expected from central banks like the Fed, BoE, and RBA within a year. The Riksbank’s strong position is supporting the SEK, which is already the best-performing G10 currency in 2023. Since late 2023, the EUR/SEK has been declining, reversing a long-term uptrend that began in 2013. There is a chance for EUR/SEK to drop further to around 10.60 over the next year, depending on stronger Swedish economic data. Next week’s Swedish Q3 GDP and September retail sales will be crucial for indicating economic improvements. If the Riksbank does not cut rates further, it might be wise to sell EUR/SEK when it rises. The 200-day simple moving average (SMA) at EUR/SEK 11.08 could act as a barrier. The Swedish Krona has a strong position because the Riksbank is expected to maintain interest rates in the coming year. Data from Statistics Sweden revealed that the CPIF inflation rate for September is steady at 2.3%, supporting this outlook. This is quite different from the European Central Bank, where markets foresee further easing, as the latest flash estimate for the HICP in October 2025 dropped to 1.8%. However, the SEK’s continued strength largely depends on solid economic data from Sweden, as much of the Riksbank’s tough stance is already reflected in the current exchange rate. The market is eagerly waiting for next week’s Q3 GDP data after a modest 0.2% growth in Q2 2025. A positive surprise in this report would be needed for the Krona to gain significantly. It’s important to note that the SEK has been performing well this year, and EUR/SEK has been on a downward trend since the end of 2023. A similar strong performance occurred from 2017 to 2018 before a notable correction, so it’s wise to exercise caution. This suggests that buying the Krona now might be chasing a trade that has already peaked. Therefore, the strategy is to sell EUR/SEK on any upward movements, particularly as it nears technical resistance. For those trading derivatives, consider buying EUR/SEK put options or setting up bear call spreads when the pair approaches its 200-day moving average near 11.08. This tactic allows participation in the expected decline while managing the risk of a short-term price spike. This strategy aligns with a potential moderate drop in EUR/SEK over the next year. Options traders could consider longer-dated contracts expiring in six to twelve months. This would prepare them for a possible move toward the 10.60 area if the Swedish economy remains strong.

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