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Riksbank's decision will support the Swedish crown?

Riksbank's decision will support the Swedish crown?

created Marcin Kiepas20 Września 2022

The EUR / SEK exchange rate has been steadily climbing since September 12, when it completed the downward correction. Yesterday the pair rose to 10,8249, breaking the highs from the beginning of July (10,8097) and tested the highest levels since the beginning of March this year. This morning the euro was traded at 10,8059 Swedish kroner. 

How much you will have to pay at the end of the day will largely depend on today's decision of the Swedish central bank (Riksbank) on interest rates. The decision will be announced at 09:30.

Inflation in Sweden higher than expected

In August, CPI inflation in Sweden clearly accelerated, exceeding market expectations. It increased to 9,8 percent. in a year-on-year relationship from 8,5 percent. in July this year. Economists predicted that it would be at the level of 9,6 percent. R / R. In monthly terms, inflation increased by 1,8% in August. against 0,1 percent in July.

EURSEK Daily_tickmill_20092022

EUR / SEK daily chart. Source: Tickmill

Rapidly rising inflation in Sweden, but also the policy of other central banks (incl. Fed, ECB i SNB) causes the Swedish Riksbank to have no choice and today it has to raise interest rates by a minimum of 75 basis points. This means that the main rate in Sweden will increase to 1,50 percent after this decision. from 0,75 percent yet. Such a decision should already be in prices, hence it will not have a significant impact on the behavior of EUR / SEK. The signals sent by the central bank at the same time may have such an impact.

Due to the inflation situation in Sweden, compared to the expected interest rate hikes by the European Central Bank, it cannot be ruled out that the Riksbank will decide on a more aggressive move and raise rates by 100 bp. This should push the EUR / SEK rate lower. Especially that the hikes in the cost of money in Sweden will not end there and the bank will probably decide to move by 75 bp at the November meeting.   

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About the Author
Marcin Kiepas
Tickmill UK analyst. Financial markets analyst with 20-year experience, publishing in Polish financial media. He specializes in the foreign exchange market, Polish stock market and macroeconomic data. In his analyzes he combines technical and fundamental analysis. Looking for medium-term trends, examining the impact of macroeconomic data, central banks and geopolitical events on the financial markets.

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