EUR/SEK: A Tactical Long Play as Monetary Policy Divergence and Geopolitics Fuel Gains

The EUR/SEK currency pair has emerged as a compelling tactical opportunity in 2025, driven by widening monetary policy divergence between the European Central Bank (ECB) and Sweden's Riksbank, alongside the Swiss National Bank's (SNB) normalization path. With geopolitical risks and concerns over U.S. fiscal stability amplifying demand for euro-denominated assets, EUR/SEK is poised to test key resistance levels. Here's why investors should consider a long position now.

Monetary Policy Divergence: The ECB Holds Steady, While Sweden Eases Further

The ECB's cautious stance contrasts sharply with Sweden's aggressive easing cycle. UBS analysts predict a 25-basis-point cut at the ECB's July meeting, reducing the deposit rate to 1.75%, but this follows an eight-cut cycle that has already brought rates down from 4% to 2%. ECB President Christine Lagarde has emphasized a “data-dependent” approach, with inflation projected to remain near 2% through 2025. The ECB's terminal rate is likely nearing completion, with markets pricing in only one more cut by year-end.

Meanwhile, the Riksbank's June policy meeting confirmed a 25-basis-point cut to 2.0%, with Governor Erik Thedéen signaling further easing if growth underperforms. Sweden's GDP growth forecast was slashed to 1.2% for 2025, while inflation is expected to dip to 1.0% by year-end. This weak outlook justifies deeper cuts, potentially pushing the policy rate to 1.75% by mid-2026. The ECB-Riksbank rate differential is now narrowing in favor of the euro, a dynamic that typically strengthens EUR/SEK.

SNB's Shift Adds Momentum to EUR Strength

The SNB's June rate cut to 0% underscores a broader divergence in European monetary policy. While the ECB and Riksbank face inflation challenges, the SNB confronts deflation (-0.1% in May 2025), pushing it toward negative rates. This divergence weakens the Swiss franc (CHF) relative to the euro, indirectly supporting EUR/SEK. The euro's strength against a weakening SEK and CHF is amplified by safe-haven flows as geopolitical risks rise.

Geopolitical Risks and U.S. Fiscal Concerns: Tailwinds for EUR

The Iran-Israel conflict and ongoing U.S.-China trade tensions are heightening demand for euro assets. Reserve managers, already wary of U.S. fiscal stability amid rising debt levels and political gridlock, are reallocating funds to the eurozone. A highlights the growing imbalance, making EUR a safer haven than USD.

Technical Setup: Target 11.70, Support at 11.40

Technically, EUR/SEK has held above 11.00 since March 2025, with resistance at 11.70 (the 200-day moving average) and a potential break toward 12.00. A close above 11.70 would confirm a bullish trend continuation. Immediate support rests at 11.40, with further downside limited by ECB policy stability and Riksbank easing.

Investment Thesis

• Position: Long EUR/SEK
• Entry: Now, below 11.60
• Target: 11.70 (initial), 12.00 (long-term)
• Stop-Loss: Below 11.40
• Risk Factors: Positive U.S.-EU trade talks (could delay ECB cuts), Riksbank surprise pause, or a sharp CHF rebound.

Conclusion

The EUR/SEK pair offers a compelling risk-reward trade as monetary policy divergence and geopolitical risks favor the euro. With the ECB near its terminal rate, the Riksbank still easing, and SNB normalization efforts supporting EUR strength, investors should consider a tactical long position. EUR/SEK's technical setup and macro fundamentals align for a move toward 11.70, with further upside potential as global uncertainties persist.