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USD/SEK Jumpy as Riksbank Holds Rates, Boosts Bond Buying

USD/SEK Jumpy as Riksbank Holds Rates, Boosts Bond Buying

Nick Cawley, Strategist

Talking Points

- USDSEK volatile on additional quantitative easing news.

- Central bank acts as inflation refuses to budge.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

The Swedish central bank, Riksbank, has upped its quantitative easing program and will buy another SEK30 billion of bonds in in the first six months of 2017. In a statement following the decision, the central bank said that while increasingly strong economic activity creates the conditions for inflation to continue rising, “there are risks that can jeopardize the upturn in inflation.”

“Inflation has been lower than expected in recent months, and it is still uncertain how quickly it will rise going forward. It is difficult to know, for instance, how the krona exchange rate will develop in an environment where the ECB has extended its asset purchase programme and the Federal Reserve has raised its policy rate.” The central bank added, that “the krona will strengthen slowly in the period ahead.”

Chart 1: Forecasts for Swedish Inflation, GDP, Unemployment and Repo Rate

USD/SEK Jumpy as Riksbank Holds Rates, Boosts Bond Buying

The Swedish Krona bounced around after the announcement and pulled back a little of its recent weakness. The Krona has weakened against the US Dollar in the last week from around 9.16 to 9.35 pre-announcement.

Chart 2: USDSEK 5 Minute Chart (21 December 2016)

USD/SEK Jumpy as Riksbank Holds Rates, Boosts Bond Buying

--- Written by Nick Cawley, Analyst

To contact Nick, email him at Nicholas.cawley@ig.com

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