Summary:
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Minutes show Riksbank does not plan to back down from rate hikes
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Even more dovish members try to seek arguments behind monetary tightening
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SEK strengthens in the aftermath, a more sizeable gain could be limited though
The Riksbank minutes from the meeting held on 5 September showed that a majority of members agreed that monetary tightening would be needed in the nearest future, there was no the precise date when a hike cold take place though (the Swedish central bank signalled that it could happen either in December or February). One of the most interesting points being worth mentioning was a remark coming from Governor Ingves who said that “with higher growth and inflation than in the Eurozone, it seems natural to also have a higher interest rates in Sweden than that of the ECB”. It pains the interesting backdrop for everybody being interested in the Swedish economy as most of them doubted the Riksbank could begin rising rates well before the ECB does so. For all such remarks from Ingves market participants will probably keep their stance in this topic but there is no doubt that higher rates are coming - the question is when the Riksbank pulls the trigger. Let us remind that the latest inflation report turned out to be a disappointment when it comes to core price growth but having so crowded SEK short positioning one can suppose that a much deeper pullback from the current levels looks unlikely one needs to take into account that the balance of risks is tilted to the upside for the krona.
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Open account Try demo Download mobile app Download mobile appAnother point of note from the minutes concerned Per Jansson, who is leading the more dovish fraction in the central bank. Analyzing the minutes one may arrive at a conclusion that he is trying to find some arguments behind the normalization process by referring to other central banks hiking and by pointing at the probability of wage inflation rising. On the other hand, he said that “it will be far from easy to meet the inflation target going forward” but simultaneously added that he “perceives the arguments suggesting that the situation is set to improve, approximately in line with the picture outlined in the draft report, to be fundamentally strong”.
Technically the USDSEK has reversed from its local supply zone of around 10.58 but bulls are facing a huge obstacle in form of 10.46. This level needs to be broken so as to allow SEK bulls to continue pushing ahead. The major support area is localized in the vicinity of 10.22. However, do remember that the SEK could struggle in the nearest future for political reasons. By and large, the Sweden’s currency might be undoubtedly regarded as one of the most value-bearing major currencies. Source: xStation5
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