This weekend, something ‘changed’ in Europe. The bronco encounter between the president of the United States, Donald Trump, and that of Ukraine, Volodimir Zelenski, in the White House last Friday made European leaders closed ranks during the summit held in London this weekend. The main commitment of the appointment was that Europe will throw the rest to rearm in an increasingly dangerous world in which Washington will no longer be so voluntary in help. This precipitous purpose of Rearme, whose intention has already telegraphed the call to be close German chancellor, Friedrich Merz, saying that Europe should “independent” from the United States with its still recent electoral victory in the main economy of the Eurozone, has had a first and logical winner: the defense sector. But also another asset as ‘unexpected’ as a currency: the Swedish crown.
The currency of Sweden It rose more than 2% against the dollar on Mondaysurpassing their peers from the G-10 after European leaders boost plans to increase defense expenditure and support Ukraine. The Outstanding Military Industry of the country It is considered one of the main beneficiaries of any increase in financing, and as a result its currency is being strengthened.
“The Swedish crown continues to register significantly higher than its G-10 counter A very sensitive currency of the feeling of the Eurozoneand the rebound of the European Variable Income is feeding the rise of the crown this week, “writes on a note for clients Francesco Pesole, Currency Stamy of ING.
The Sweden Defense Exports They are among the largest of the main economies in terms of proportion of the gross domestic product (GDP). “The Swedish defense industry represents a larger part of GDP in relation to France and Germany, which increases interest in buying the maltrecha currency,” says Marcus Widén, an analyst at the Swedish Bank Seb. “While Swedish companies are not compared in size with the French or German, as a percentage of GDP, the country is overrepresented,” coincides Juckes Kit, head of exchange strategy of Société Générale, who is also optimistic about the crown.
The truth is that Swedish exports of large weapons teams have increased by 7% since 2020, while French exports have fallen 16%, according to data from the International Institute for Peace Research in Stockholm. Exports of defense products and services represented 0.6% of the economic production of Sweden in 2023, compared to 0.2% of Francewhich is commonly considered the largest military producer in Europe, according to data from the United Kingdom government and the World Bank compiled by Bloomberg.
“Sweden has an important arms capacity,” says Jeremy Stretch, head of CIBC exchange strategy, which provides that the crown will be seen up to 10.9 per euro at the end of the year (this Tuesday is quoted around 11.09 units per euro). “As the world expenditure in defense, particularly in Europe, is only in one direction, that would indicate additional demand and, therefore, transactional flows in the crown.”
While Sweden’s defense exports are a fraction of powers such as the US, South Korea or France, Swedish companies such as the famous Saabfamous for its iconic cars in the 90s and that yesterday rebounded up to 12% in the Stockholm bag, and BAE Systems They produce everything from combat and submarine aircraft to support weapons, combat vehicles and air -transported control and early alert platforms.
Since European heads of state are rushed to unlock hundreds of billions of euros to reinforce their military capabilities -the president of the European Commission, Ursula von der Leyen, announced on Tuesday a potential financing of almost 800,000 million -this additional expenditure I could give the Swedish economy a very necessary impulsesince he has struggled to recover from an important real estate crisis and its interest rate reduction cycle is coming to an end.
The strategists claim that all this could help the crown strengthened 2.5% more for the end of the year in front of the euro. In Danske Bank, the Kiverstine Kundby-Nielsen types and types now recommends, in the middle of the crown increase, that investors take profits in a long position that the firm had recommended in front of the Norwegian crown in January. Even so, the movements in the options market suggest more increases for the crown in the next three to six months and everything indicates that the operators have become less bearish with respect to the currency in front of the euro since April.
As defense equipment contracts usually have a longer duration than those of other manufactured goods, an increase in demand would probably lead to need for larger exchange coverage contracts For longer periods, which would also help strengthen the crown, says Michel Gubel, Svenska Handelsbanken exchange strategist.
However, not all analysts see such a positive picture. Pesole himself, from ING, is not convinced of a last strength of the SEK: “We hope that American tariffs in April weigh on trust European, and a variable rental correction should affect the Swedish crown more than the euro. On the other hand, the markets could be close to their maximum point of optimism in relation to Russia-Ukraine, and a suboptimal truce for Ukraine and the EU would weigh on the crown. “
A rearme that has no ‘back’
Since the end of World War II, Americans have protected the European democracies of Russia. This 80 -year security guarantee is now a thing of the past. In a speech before the European members of NATO, the United States Secretary of Defense, Pete Hegesh, recently said that in the future Europeans will have to assume responsibility for their own conventional security.
“This would not be a problem if the Russian leaders wanted peace, but the Putin regime apparently wants to recover at least part of the territory that Russia lost after the collapse of the Soviet Union. It has long shown an extremely aggressive attitude towards its direct western neighbors, such as Poland. In this sense, It is very possible for Russia to test the defensive preparation of Western democraciesfor example, attacking a Baltic country, once it has recovered militarily from the war in Ukraine within a few years. Until then, NATO’s armed forces of European members must be strong enough to repel a possible conventional russia attack without the help of the United States “, they develop in a report for customers Jörg Krämer and Ralph Solveen, CommerzBank analysts
Faced with this little benign scenario, they continue from the German bank, “Europeans do not currently have that military capacity, because they greatly reduced their defense expense after the collapse of the Soviet Union.” The majority of NATO European countries have not reached the objective set in 2014 to spend 2% of GDP in defense for many years. If compared to that relationship, The accumulated sub -investment in the last ten years amounts to almost 700,000 million dollarsthat is, 3.6% of the GDP of the European members of the Atlantic Alliance.
According to the US government, Europeans should increase their defense expenditure to 5% of their GDP to be able to defend themselves. In the end, this increase could remain in 3.5% consensusbut it would remain almost double what most countries have recently spent. The additional annual expenditure for all NATO European countries would amount to 280,000 million In euros, they estimate in Commerzbank. A study by the Kiel World Economy Institute reaches a similar figure: 250,000 million euros. These amounts are arrived or not, the rearme has no turning back and the Swedish crown can continue to ‘take advantage’.
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