The US dollar has been trading higher since the release of solid US housing market data and the Conference Board consumer confidence report on Tuesday. Gains on the greenback market continued yesterday, supported by rather hawkish remarks from Fed Chair Powell during panel discussion at ECB forum in Sintra, Portugal. Powell said that the majority of Fed members expect at least 2 more rate hikes this year and that it will take time until at least 2025 for core inflation to return to the 2% target. Those comments were repeated by Powell again this morning with the Fed chair adding that the risk of overdoing tightening isn't in balance yet.
While USD is gaining amid hawkishness of Fed, Swedish krona is dropping in spite of Riskbank's hawkishness. The Swedish central bank delivered a 25 basis point rate hike today, in-line with market expectations. Main interest rate increased to 3.75% - the highest level since December 2008. Additionally, Riksbank noted that at least one more rate hike is expected this year. CPI inflation forecast for 2023 was left unchanged at 5.9% while forecast for 2024 was revised higher from 2.3 to 2.4%. On top of that, Riksbank decided to accelerate the pace of balance sheet reduction in an attempt to support SEK, whose weakness is one of the factors fuelling inflation in Sweden.
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Open account Try demo Download mobile app Download mobile appThose comments from the Swedish central bank, however, failed to support SEK. Taking a look at USDSEK chart at D1 interval, we can see that the pair is trading higher today. A test of the resistance zone marked with 50% retracement of the downward move launched in September 2022 was made following the Riksbank decision but bulls failed to break above this hurdle. However, as this zone has been tested a few times already in recent days, likelihood of the upside breakout increases with each test. Should we see a break above, the next resistance zone to watch can be found in the 11.00 area, marked with 61.8% retracement.
Source: xStation5
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