Cheap holidays in Sweden and Norway

After a slide in the spring, the Swedish and Norwegian krone have taken a standstill in recent weeks. However, there is a good chance that the Scandinavian currencies will take another step back if political uncertainty in France increases.

The lack of nice summer weather can be the deciding factor in many Dutch living rooms to move to the South this summer. But in recent years, holidays to Scandinavia have become increasingly popular. In August last year, the number of Dutch people who holidayed in Sweden was already 37% higher than in 2019, according to travel umbrella organization ANVR. Norway was visited by almost twice as many holidaymakers from our country than four years earlier. An increasingly large group of people are opting for an active holiday, instead of a few weeks of baking in the sun. The Northern European countries also have a very practical advantage. There are many more charging points for electric cars than on the roads to the South.

Step back
The currencies of Scandinavian countries usually do not fluctuate much against the euro. But in the spring, both the Norwegian and Swedish krone took a step back. An important reason was the prospect that the European Central Bank (ECB) will reduce the policy interest rate less sharply in 2024 than initially expected. A relatively higher interest rate makes it more attractive to maintain financial reserves in euros. On the other hand, a somewhat faster decline in interest rates is visible in Sweden. The Riksbank is aiming for two or three interest rate cuts, which will boost the economy. Economic growth has fallen almost to zero and unemployment stands at 8,3%.

Overheating in Norway?
That is a big difference with Norway, where only 2% of the working population is without a job. Because core inflation is very close to the central bank's target, the policy rate of 4,5% will not be reduced any time soon. With this, the Norges Bank would leave the door open to an overheating of the local economy. A first interest rate cut will probably not come until 2025. The Norwegian krone also has the wind at its back from a rebounding oil price. Since the beginning of June, the price of Brent oil has risen almost 15% to $86 per barrel. Norway is one of the ten largest oil exporters and the price fluctuations of black gold sometimes have a significant influence on the price of the krone.

Predictable Danish stopover
August 20 will be an important day for holidaymakers in Sweden. It will then probably be announced that the policy interest rate will be reduced by 0,25 percentage points. There may be a small advantage to waiting until that day before withdrawing Swedish krona. The Norges Bank will tie the knot a week earlier, but little interest rate fireworks are expected in that respect. Finally, currency timing is not necessary at all during the stopover in Denmark. This currency traditionally moves very nicely with the euro. In Denmark you have been getting between 7,4 and 7,5 Danish krone for one euro for years.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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