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Swedish Krona Rallies

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Both the USD/SEK and the EUR/SEK have fallen to new lows as central bank comments show the Riksbank attempting to rein in inflation in light of rising commodity prices and strong GDP growth.

Hawkish comments from the Riksbank caused yesterday's surge in the value of the krona with tougher talk on inflation coming from the central bankers during the last monetary policy meeting on February 14th.

The bankers suggested what might motivate them to increase the base interest rate more than the typical 25 bp. During the previous meeting the monetary policy committee increased Sweden's repo rate by 0.25% to 1.5%.

At the previous meeting, the Riksbank stressed growth in Sweden remains strong but has slowed recently due to the rise in commodity prices. The central bank also noted noticeable improvement in the US economy has helped the Swedish economy. However, uncertainties remain in the euro zone.

The current inflationary target for the Riksbank stands at 2.0% but in January the rate of inflation rose 2.5% when measured on a yearly basis. In December the rate of inflation measured 2.3%.

The next meeting for the monetary policy committee will take place on April 19th with the results of the meeting to be released the following day. Here the Riksbank may once again increase interest rates to stymie persistent inflation, further boosting demand for the krona.

On the heels of the release of the meeting minutes, the Swedish krona surged to new highs versus both the dollar and the euro, shrugging off negative retail sales data that came in below forecasts, -0.1% on expectations of a 0.7% increase.

The USD/SEK made two significant technical moves yesterday, falling below the support line at 6.3540 and holding at the 6.2890 level. The move is a breach below the falling wedge pattern that has held since October 2010. A close below the lower line of the wedge may incite further selling of the pair. Resistance is found at this week's high at 6.4450 and the February high of 6.5400.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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