Riksbank on Hold for Now but is Looking for Reasons to Raise Rates

Riksbank on Hold for Now, but is Looking for Reasons to Raise Rates

Last week, Riksbank Governor Stefan Ingves told Bloomberg that the low interest-rate environment is adding to “increased risk taking” and therefore poses a threat to financial stability. A big part of the problem, he added, is global financial conditions. Earlier today, Sweden’s PPI (MoM) for October was released at 0.4% vs 0.2% forecast. Riksbank’s Skingsley added today that one single data point is not decisive for December (Risksbank Rate Decision meeting), and you can raise rates when inflation is under target if it looks like we will get back to target.” Expectations are currently for the Riksbank to leave rates on hold at -0.25%, however there is still plenty of data to be released before the December 19^th meeting, including Business and Consumer Confidence and Retail Sales this week, and Manufacturing PMI early next week.

USD/SEK has been trading in an ascending channel since the end of 2018, and currently is testing the bottom trendline looking for a break. Price closed just below the rising trendline at 9.5848. One possible reason USD/SEK has been trading lower since early October is that traders may now be looking for a possible surprise and the next Meeting, or at the very least, a hawkish statement.

Source: Tradingview, City Index

On a 240-minute timeframe, USD/SEK broke a shorter term trendline as well today near 9.60. If price breaks below the 61.8% retracement level from the lows on July 19^th to the highs on October 9^th at 9.5574, it has room to run down to horizontal support near 9.50. The next support level is the July 19^th low at 9.3050. Resistance is so close to currently levels at 9.6000, and above that at a series of recent highs near 9.6500. Above that is the downward sloping trendline from October 19^th near 9.7000.

Source: Tradingview, City Index

Data over the next week from Sweden will be extremely important in determining the direction of USD/SEK over the short term as traders and investors position themselves ahead of the December 19^th Risksbank Rate Decision Meeting. The Meeting itself, should help to provide direction over the long term.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.