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Investing.com - The Swedish krona weakened against the euro following a more dovish-than-expected Riksbank meeting, pushing the EURSEK currency pair higher.
The Riksbank cut interest rates by 25 basis points and signaled the likelihood of another reduction, contradicting its March announcement that had indicated an end to the easing cycle. This policy shift occurred amid slowing growth momentum and elevated trade uncertainty in the Swedish economy.
UBS analysts suggest the krona’s setback will likely be temporary, forecasting the EUR/SEK pair will resume its downward trajectory toward 10.50 next year. Sweden remains well positioned to benefit from the repatriation of foreign assets into domestic markets, which should support the currency despite current pressures.
A potential resolution of trade tensions between Europe and the United States would further strengthen the krona, as these relationships are critical for Sweden’s open economy. Such developments could help the country meet the Riksbank’s recently lowered but still ambitious growth forecasts.
The global backdrop has become more uncertain due to rising geopolitical risks, higher energy prices, and increased volatility in trade policy, creating upside risks for the EUR/SEK pair.
UBS identifies resistance levels around 11.20 and support near recent lows of 10.70, while warning that a more aggressive trade war and European recession could push EUR/SEK back to 11.50.
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