USD/SEK edging lower as Riksbank stands pat
City Index December 15, 2015 7:16 PM
<p>Markets have been relatively quiet so far today with traders primarily adjusting their positions modestly ahead of tomorrow’s highly-anticipated Fed meeting (stay tuned for our […]</p>
Markets have been relatively quiet so far today with traders primarily adjusting their positions modestly ahead of tomorrow’s highly-anticipated Fed meeting (stay tuned for our full FOMC preview this afternoon).
However, there was one other second-tier central bank in action today: Sweden’s Riksbank. Much like the Swiss National Bank, Riksbank policymakers no doubt breathed a big sigh of relief when the European Central Bank opted for more tentative easing measures two weeks ago, as the half-hearted actions by the region’s behemoth central bank lessened the pressure on its smaller rivals to follow suit.
The Riksbank stuck to the script in today’s meeting, leaving its main repo rate at 0.35% and refraining from expanding its current SEK 200B bond buying program in a unanimous decision. Some market participants were anticipating a modest interest rate cut or expansion of the bank’s quantitative easing program, and the krona has rallied as these traders abandoned their short positions.
Before SEK bulls get too carried away however, it’s worth noting that the Riksbank did include a bit of an “escape clause” in its accompanying statement. Specifically, the world’s oldest central bank explicitly noted that it was “highly prepared” to ease monetary policy even between its scheduled monetary policy meetings. In other words, Sweden’s economy remains vulnerable to any lurches lower in the Eurozone economy, so the Riksbank is at great pains to prevent any unnecessary strength in the krona.
Technical View: USD/SEK
As we noted above, the SEK immediately strengthened in the wake of the release, but that initial burst higher is already starting to fade on the back of the dovish commentary. USD/SEK remains almost perfectly centered in the 8.10-8.85 range that has contained rates for almost the entire year thus far.
It is worth noting that the daily MACD indicator has rolled over a couple of weeks ago and recently crossed back below the “0” level; previous turning points in this indicator have marked significant tops and bottoms in USD/SEK for months. Therefore, rangebound traders may consider looking for more weakness toward the bottom of the range in the lower 8.00s as long as the MACD continues to trend lower.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.