The Swedish and Norwegian currencies will gain ground versus the euro in the coming 12 months. This likely hits the multi-year highs at a time of strong economic recovery in the Nordic region. Amidst a high uptake of Covid vaccinations and drop in infection, the Sweden and Norway recently ended almost all remaining social restrictions. This is to allow the businesses to thrive. The currencies have recovered to trade slightly stronger against the euro. They have improved much better before than their pre-pandemic levels.
Norway’s crown has rallied about 6%. According to the poll, this can increase further more. Analysts attribute the crown’s lift in recent weeks to hawkish monetary policy. Norges Bank last month raised rates for the first time since 2019. But the often-volatile Norwegian currency is also at risk of periods of decline. Nordea Markets cautioned that NOK is no safe haven in troubling times and could easily weaken. In Sweden, where the currency has weakened slightly against the euro, the crown is expected to make gains. This is to hit its strongest level since early 2018.
The Riksbank has held its benchmark repo rate at 0%. Some economists see the rebound in the Swedish economy as an opportunity for the central bank to tweak its overall monetary policy approach in 2022. Capital Economics said to their clients that the stars are starting to align behind their view that policymakers will start to allow the balance sheet to contract next year. The Swedish currency would make gains of around 2.5% against the euro as per the prediction of the median forecast.
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