Swedish Krona: Undervalued SEK with constrained upside – Nordea

Nordea strategists remain constructive on the Swedish Krona (SEK), viewing it as undervalued and supported by robust domestic fundamentals and improving macro data. However, they note fading momentum into 2025–2026, a more hawkish Federal Reserve (Fed), Middle East uncertainty and dependence on EUR/USD stability. They see potential Riksbank hikes as supportive via narrower rate differentials but warn upside in SEK is now more limited.

Undervalued but less bullish now

"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."