Sweden and Norway's currencies are expected to make modest gains against the euro over the coming year as the ECB's quantitative easing programme drives down the single currency, outweighing expected looser monetary policy in the Nordic region. In January, the European Central Bank said it would pump billions of new money into the financial system through sovereign bond purchases to revive the region's moribund economy and push up inflation.
Central banks in Norway and Sweden are likely to respond, but have less scope for action than the ECB. "The ECB is going to print 60 billion euros a month, that's the driving force behind all of this," said Anders Soderberg, head of technical analysis at banking group SEB. Sweden's central bank is widely seen adopting negative interest rates, unconventional measures of its own - or both - but it will not be able to compete with the ECB's "big bazooka".
Many economists expect the Riksbank to cut rates next week with either bond purchases or cheap loans to banks to follow later this year. Growth in Sweden will also outpace the euro zone this year with the central bank forecasting the economy will expand around 2.6 percent this year before picking up pace in 2016. The International Monetary Fund expects growth in the euro zone to be 1.4 percent this year.
Falling oil prices have hurt growth in Norway and the government recently cut its GDP forecast for 2015 to 1.2-1.5 percent, in line with the euro zone. The Norwegian crown has lost around 2.8 percent against the euro over the last six months. However, many analysts believe crude prices may have bottomed out. Norges Bank recently raised its purchases of crowns which should help support the currency. In December, Norges Bank cut its key policy rate by a quarter percentage point to 1.25 percent and said it may cut the rate again in 2015. It does not plan to use unconventional policy. Analysts expect a rate cut in March. Both Nordic currencies were seen easing against the dollar.