The currencies of Sweden and Norway will strengthen over the coming year as rate-setters in the two countries pursue a more hawkish monetary policy path than other major economies, on the back of strong domestic growth, a Reuters poll showed on Friday. The poll predicted more limited gains for the Nordic currencies versus the previous survey in April.
Sweden's crown is forecast to reach 10.415 against the euro a year from now and Norway's 9.40 per euro. Last month, Norway bucked a dovish trend among central banks, raising its main interest rate and pointing to the likelihood of two more hikes in the coming year. Sweden's central bank is facing more headwinds in tightening policy, but stuck this week with its forecast that it would tighten late this year or early next, though many analysts still say a rate cut may be delayed.
"The economy in Sweden is going better than Europe and we have a forecast for a rate cut from the ECB which could mean that the strengthening of the crown goes a bit faster. But we believe generally there will be a gradual strengthening against the euro," said Claes Mahlen, chief strategist at Handelsbanken. "If the ECB cuts and there is also QE from the ECB, which seems quite possible, that would give a bit of support to the crown against the euro." In marked contrast to much of the rest of the world, both Sweden and Norway are enjoying strong growth with inflation near target or even slightly above.