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Investing.com -- Bank of America expects limited foreign exchange impact from next week’s central bank meetings, with modest downside risks for the Norwegian krone against the Swedish krona.
The bank maintains a constructive outlook on both Nordic currencies for the remainder of the year but currently favors the Swedish krona over the Norwegian krone in the near term.
Both currencies, particularly the Swedish krona, are positioned to benefit from Europe’s fiscal initiatives and potential rotation into domestic assets, according to Bank of America. An important factor that could support both currencies is the possibility of higher equity hedging ratios among local asset managers.
The bank notes that the Swedish and Norwegian currencies may gain strength from relatively tighter monetary policies compared to the European Central Bank. Additionally, both Nordic economies are expected to experience faster growth than the broader Euro area.
Current market positioning for both currencies remains light, with particularly sparse positioning in the Swedish krona. This positioning dynamic could provide room for appreciation as investors potentially increase their exposure to these Nordic currencies.
Bank of America’s analysis suggests both currencies have positive outlooks despite the modest near-term risks associated with upcoming central bank meetings. The bank’s preference for the Swedish krona over the Norwegian krone indicates its stronger potential for appreciation in the immediate future.
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