Related Post
- The USD/SEK pair is close to a two-and-a-half year low partly because of the stronger dollar.
- The US dollar has dropped by 0.18% today and is at a two-year low.
- Economists believe that the Swedish economy will rebound faster than peers.
The USD/SEK declined by more than 0.15% during the Asian session mostly because of the risk-on sentiment in the market. It is trading at 8.4265, which is the lowest it has been since April 2018. Further, the Swedish krona has gained by about 20% since March this year.
Sweden and Covid-19
Unlike most Western countries, the Swedish government decided to avoid large strict lockdowns. Unfortunately, that decision led to more Covid cases and deaths compared to its neighbouring countries.
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
In total, the country has confirmed more than 305,000 cases and more than 7,296 deaths. In contrast, Norway recorded just 39,000 cases and 361 deaths. Denmark has confirmed about 97,000 cases and 904 deaths.
Also, the Swedish economy did not do any better than its neighbours. In the second quarter, the country’s GDP declined by 8.6% and then bounced back by 4.3% in Q3. In the same period, Sweden’s economy contracted by 6.3% and then rose by 5.2%.
The Swedish krona’s rally continued yesterday after the statistics office released better-than-expected consumer price index (CPI) data. The numbers showed that the CPI rose by 0.0% in November from a 0.1% decline in the previous month. Further, the CPI rose by 0.2% on a year-on-year basis. Additionally, the CPI at constant interest rate rose by 0.2%.
This increase was mostly because of higher electricity and house repair costs. But they were offset by lower crude oil prices.
These numbers came a day after the bureau released robust household consumption data. The consumption rose by 0.1% in October mostly due to higher retail trade and transport.
Stronger Swedish krona
The USD/SEK has fallen because of several reasons. First, most analysts believe that Nordic economies will have a faster recovery than the rest of Europe. In a recent note, analysts at HSBC cited the level of fiscal stimulus by the country.
Second, the overall weaker US dollar has also contributed to the krona strength. In the past few months, the dollar has continued to slump mostly because of the risk-on approach by investors. For one, we now have a Covid vaccine and Joe Biden is going to be president.
Finally, the Swedish krona has also gained because of the overall hawkishness of the Riksbank. In its most recent interest rate decision, the bank hinted at higher rates in the coming years.
USD/SEK technical outlook
The daily chart shows that the USD/SEK pair has been under pressure in the past few months. The downward trend is being supported by the short and long-term exponential moving averages. The Relative Strength Index (RSI) has also been falling.
Therefore, in the near term, the path of least resistance for the pair is lower, with the next target being at 8.300. On the flip side, a move above the psychological level of 8.70 will invalidate this trend. You can take advantage of these movements by checking out some of the best CFD trading brokers.
