SEK TALKING POINTS – USD/SEK, SWEDEN ECONOMY, RIKSBANK, FOMC, MARTIN FLODEN
- USD/SEK eyeing FOMC minutes and Floden discussion
- Intended rate hike may be derailed by risks from abroad
- Domestic and international concerns are weighing on SEK
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Following the release of Swedish CPI data that disappointed across the board, USD/SEK skyrocketed through 9.3110 and reached past 9.4066. A breach beyond this point worth taking note of because the last time the pair reached a height to this degree was in December 2016. Some pullback in the next few days is expected as negative RSI divergence hints at ebbing upside momentum.
USD/SEK – Daily Chart
USD/SEK may remain tense until the release of the FOMC meeting minutes. If the content contains a more-than-expected dovish undertone, it could briefly push USD/SEK down. However, following the initial reaction, the US Dollar may rise as investors weigh fundamental risk factors that may be causing the Fed to reverse from its previously hawkish disposition. Consequently, this may push the pair higher.
Krona traders may also be keeping an eye out for Riksbank Deputy Governor Martin Floden’s discussion on the central bank’s monetary policy on Wednesday in Stockholm. This follows the recent policy meeting where the Riksbank decided to hold the benchmark rate at -0.25 percent after hiking rates for the first time in seven years in December.
During the meeting, Riksbank Governor Stefan Ingves surprised investors with a – relatively – hawkish and optimistic outlook. However, unlike Stefan Ingves, Floden will likely have a more pessimistic outlook on Swedish growth and might support a less hawkish approach to policy going forward. This might add to the additional pain the Krona may face from the FOMC meeting minutes.
Fundamental risk factors such as Brexit, slower EU growth and uncertainty of the US-China trade war are weighing on policymakers and the export-driven Krona. The long-term outlook suggests these elements will continue to provide the underlying momentum for USD/SEK to continue climbing. Since early January, the pair have gained over five percent.
Since 9.4066 has recently been tested, it could be a signal that markets are feeling bullish on the pair despite the potential short-term retreat USD/SEK may experience after entering overbought territory. Keeping an eye on European data and developments in US-China trade relations will be crucial, along with monitoring Sweden’s upcoming GDP data scheduled for February 28.
USD/SEK – Daily Chart
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
