The Swedish krona held steady against the US dollar after the Riksbank delivered its interest rate decision on Tuesday. The USD/SEK pair was trading at 9.34, down about 17% from the highest level in December last year.
Riksbank interest rate decision
The USD/SEK exchange rate continued falling on Tuesday even as the Riksbank delivered another dovish interest rate decision.
In it, the monetary policy committee decided to slash interest rates by 0.25 %, bringing the benchmark policy to 1.75% as it sought to support economic activity in the country. Rates have now plunged to the lowest level in over three years.
In the statement of, officials noted that the country’s headline inflation was highly elevated but the core inflation, which excludes the volatile energy prices, dropped and moved to the target.
Most importantly, officials justified the cut, noting that inflation was transitory, pointing to the strength of the krona, while the pricing plans of many companies has dropped.
Riksbank, which is the world’s oldest central bank, said that the economy was doing doing well, but that this was coming from a low base. Officials then added:
“To provide further support to the recovery and to stabilise inflation at the target in the medium term, the Executive Board has decided to cut the policy rate by 0.25 percentage points, to 1.75%. If the outlook for inflation and economic activity holds, the policy rate is expected to remain at this level for some time to come.”
Jerome Powell Statement ahead
The next important catalyst for the USD/SEK exchange rate will be the upcoming statement by Jerome Powell and several other Federal Reserve officials
This will be a crucial statement as it will be the first one since officials decided to slash interest rates by 0.25% last week. It was the bank’s first interest rate cut of the year and it brought the official cash rate to between 4.00% and 4.25%.
Powell will likely reiterate his view that the central bank may decide to cut rates again in September if the labor market continues to deteriorate.
Some Federal Reserve officials have supported steeper interest rate cuts. For example, in a statement on Monday, Stephen Moran, the newest Fed official, insisted that the bank should slash interest rates more to prevent more weakness of the labor market. Moran voted for a 50 basis points cut in last week’s meeting.
However, Cleveland Fed’s Beth Hammack has warned that inflation remains stubbornly high and that the labor market was still strong. As such, she supports leaving interest rates where they are for a while.
USD/SEK technical analysis
The daily timeframe chart shows that the USD/SEK exchange rate has pulled back in the past few months, moving from a high of 11.3250 in December to 9.3246 today.
It has moved below the lower side of the horizontal channel, confirming a bearish breakdown. Also, the pair remains below the 50-day Exponential Moving Average (EMA), a sign that bears are in control.
Therefore, the most likely scenario is where the pair continues falling as sellers target the next key support level at 9.1855. A move below that support level will point to more downside, potentially to below 9 for the first time in years.
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