EUR/SEK resumes the upside and test highs near 10.78

15 May 2019

  • SEK trims part of Tuesday’s strong gains.
  • The cross moves to daily highs beyond the 10.78 handle.
  • Inflation expectations eased a tad in May.

The Swedish Krona appears to have resume the downside on Wednesday and is now lifting EUR/SEK to the area of daily highs in the 10.7800 region.

EUR/SEK looks to trade, risk trends, data

SEK trades on the defensive after the publication of inflation expectations by Kantar Sifo Prospera.

In fact, the survey showed money market player’s inflation expectations are at 1.8% within a year’s time (vs. 1.9% prev.), 1.8% within 2 years (vs. 1.9% prev.) and 1.9% in the longer 5-year’s time horizon (vs. 2.0% prev.).

Expectations for GDP growth are at 1.7%, 1.8% and 2.0% in the same time scenarios, unchanged from the previous survey.

Regarding monetary policy, the repo rate is seen at -0.3% in 3-month’s view, 0.0% within a year’s time, 0.2% in 24 months and 1.2% in 60 months.

In the meantime, the Krona is shedding part of yesterday’s sharp up move following higher-than-expected inflation figures tracked by the CPI and the CPIF for the month of April.

What to look for around SEK

It seems the the strong depreciation of the Krona in past months appears to have echoed in the domestic inflation figures, pushing the CPI higher during April, in line with the Riksbank’s forecasts. That said, the Scandinavian central bank still keeps a rate hike on the table at some point in H2 2019 or early 2020 in spite of increasing skepticism among investors, particularly against the backdrop of the ‘neutral for longer’ stance now expected from the ECB, in line with the majority of its G10 peers.

EUR/SEK levels to consider

As of writing the cross is up 0.18% at 10.7707 and faces the next hurdle at 10.8498 (2019 high May 13) seconded by 11.1167 (monthly high July 2009) and then 11.1542 (monthly high June 2009). On the flip side, a break below 10.7382 (23.6% Fibo of the April-May uptick) would expose 10.6427 (21-day SMA) and finally 10.5362 (55-day SMA).

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