Swedish krona remains besieged on dovish rate-setters

2024-05-09
Summary:

The Swedish Krona fell for the third straight day after Riksbank cut its key interest rate. More cuts may follow if price pressures stay mild.

Swedish Krona fell for a third straight day on Thursday after the Riksbank cut its key interest rate as expected and said it was likely to cut two more times in the second half of the year if price pressures remain mild.

Having tumbled around 8% this year, the currency is among the worst performing major currencies. The Norwegian Krone is also besieged despite the oil price rally, losing around 7%.


The central bank said in March it saw a good chance to cut rates in May or June, and data since then has confirmed that inflation is set to stabilize around the 2% target.


It was the first rate cut in eight years in Sweden with the focus shifting to the likely future path of monetary policy. Still there are concerns that early loosening could reignite inflation.


In contrast, Norges Bank decided to keep interest rates unchanged last week. Governor Ida Wolden Bache said "the policy rate will likely be kept at today's level for some time ahead."


The Sweden economy shrank for the fourth consecutive quarter in Q1, while GDP mainland Norway increased 0.2%. The countries have been hit harder by rising living cost than most of their European peers.

USDSEK

Swedish Krona has been consolidating since mid-April with the support at 11 stemming its further weakness. A push below 10.68 may be need to reverse the downtrend in place.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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