The Riksbank is not having an easy time: its monetary policy meeting on 26 April concluded with a maintenance of its key rate at -0.50%. The minutes from April, just released, confirmed the bank’s willingness to raise interest rates this year (expected year-end), probably earlier than the European Central Bank. USD/SEK gained 1.68 while EUR/SEK lost ground, lowering by -0.56% (year-to-date: +7.75% and +6.18%), suggesting strong USD momentum since the beginning of February. We would favour short USD/SEK and EUR/SEK positions. Both pairs are currently trading at 8.79 and 10.42, heading to 8.7695 and 10.4060 in the short-term.
Inflation data released this morning hint towards a postponement of a normalization next year. Given at 0.40% and 1.70% on month-to month and year-to-year basis (prior: 0.30% and 1.90%), consumer prices are disappointing. Should these remain so in coming months, a delay is most likely. Still, with a take off in domestic consumption and a recovery in March’s trade balance, a rate hike in 2018 is still likely. The odds remain low, but an increase in September earliest (expected in October or December) is feasible.
By Vincent Mivelaz
