Riksbank continues to play the growth card
Nov 26 (Reuters) -Economic growth and the fortunes of the Swedish crown are overshadowing any inflationary Riksbank concerns, and this scenario strengthens the case for further rate cuts.
For the Riksbank, inflation has normalized and the economy weakened, pointing to a less restrictive policy stance. The central bank cut its key interest rate by 50 basis points to 2.75% at the Nov. 6 policy meeting and the minutes from that meeting point to further cuts. We expect to see three more rate cuts, taking the benchmark rate to 2.0% by the end of the second quarter of 2025.
The crown is weakening again, reflecting external drivers rather than the Riksbank's easing cycle, but looks to have entered a loss consolidation phase versus the euro.
EUR/SEK peaked at 11.7105 on Nov. 4 and has failed to hold a smaller rally to 11.6290 on Nov. 20. The cross is supported by the 100- and 200-day moving averages, currently 11.4715 and 11.4545, respectively. Fighting the crown's corner is a Dec. 2 11.4005-11.4075 Ichimoku cloud twist. Cloud twists can appear to attract price action.
While concerns for global growth and geopolitical risk will lean on the crown, the Riksbank's focus on growth should support investor interest in the SEK and limit EUR/SEK gains, at least in the near term.
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EUR/SEK daily candle chart: https://tmsnrt.rs/3Z4yRj8
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
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