- SEK depreciates to fresh yearly lows near 10.65 vs. EUR.
- The cross climbs to levels last seen in late August 2018.
- Ingves said the Riksbank is not targeting the exchange rate.
The bearish momentum around the Swedish Krona is intensifying today, pushing EUR/SEK to fresh 2019 highs in the 10.6500 neighbourhood just to ease some ground afterwards.
EUR/SEK weaker on data, Riksbank
SEK resumed the downside this week following poor results from the Swedish industrial sector published earlier in the week.
Adding to SEK weakness, Riksbank Governor S.Ingves said yesterday that the central bank is not targeting the exchange rate, adding that the Krona is expected to pick up pace gradually while he talked down the latest lower-than-expected inflation figures.
In addition, Deputy Governor C.Skingsley highlighted the recent weakness in domestic indicators, at the same time noting that uncertainty is expected to affect the economy.
What to look for around SEK
Fundamentals in the Scandinavian economy remain healthy, although the projected global (and particularly the EMU) slowdown is expected to have its say on the performance of the domestic economy in the next months. If we add the recent forecasts for lower GDP and inflation showing some lack of traction, the outlook on the Krona appears cloudy, to say the least. In addition, SEK is also facing extra headwinds as market participants consider it a funding currency when comes to carry trade. Additionally, concerns over the global slowdown and the ‘wait-and-see’ mode from the ECB should prompt some caution in the Riksbank, despite minutes and comments by officials suggest a rate hike this year remains well on the table.
EUR/SEK levels to consider
As of writing the cross is up 0.54% at 10.6363 and a break above 10.6476 (2019 high Mar.8) would expose 10.6929 (high May 4 2018) and finally 10.7290 (2018 high Aug.29). On the downside, the initial support lines up at 10.5532 (10-day SMA) followed by 10.5303 (21-day SMA) and then 10.4651 (low Feb.28).
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