Swedish crown shows promising signs
Sept 25 (Reuters) -A knee-jerk reaction to today's Riksbank rate cut saw EUR/SEK rally to 11.3390 from 11.3030 but the subsequent pullback to 11.3060 bodes well for the SEK.
The recovery, helped by positive investor sentiment and easier monetary policy at the European Central Bank and U.S. Federal Reserve, is holding despite the Riksbank's view that its easing cycle could accelerate.
The central bank lowered its rate path and revised down its inflation forecast, pointing to 25-basis point rate cuts in November, December, and February. However, there is a risk that the Riksbank might cut by a half-point at one of the two-remaining 2024 policy meetings.
The market is now more concerned about growth now that the inflation battle is over and as such the dovish central bank stance will be viewed positively. As global interest rates fall the impact of lower domestic rates on the crown will be limited.
EUR/SEK could still adjust higher as the rate cut dust settles but while the cross is below 11.3775, a trend resistance line off the July 2024 high, the risk is for a bearish resumption and test of June lows around 11.1450.
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EUR/SEK daily candle chart: https://tmsnrt.rs/3XTnBXp
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
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