Riksbank delivers a hawkish rate hike

Sweden’s Riksbank gathered earlier today for its Interest Rate Decision meeting in which it hiked rates by 50bps to bring the borrowing rate to 3.0%, its highest level since December 2008. In addition, the Riksbank noted there will be more rate hikes ahead and that it will begin Quantitative Tightening in April. The Riksbank doesn’t meet again until April 26^th. Sweden’s January CPIF (the Riksbank’s preferred measure of inflation) rose to 10.2% YoY in December. The headline CPI print rose to 12.3% YoY, its highest level since February 1991. The central bank also noted that it would be helpful to have a stronger krona in order to guide inflation to the central bank’s target of 2%. This was a surprise to some market participants, as the Riksbank has been quiet on the currency as of late. It should be noted that this is the first central bank meeting led by Erik Thedeen after taking over as Riksbank Governor. Could we see more hawkishness ahead by the new central bank Governor?

In March 2020, USD/SEK traded to a pandemic high of 10.5016 before trading in a descending wedge formation to a post-pandemic low of 8.1252 in December 2020. USD/SEK then broke higher above the ascending wedge and began moving in an orderly channel. The pair retraced the entire move of the wedge (as is expected), and then some, reaching a high in late September 2022 at 11.4867. Notice that the pair traded above the channel as price reached the high. Often when price fails to break out of one side of a channel, it moves to test the opposite side. In this case, USD/SEK pulled back into the channel and broke the bottom trendline near 10.5000 in early November 2022. Since then, the pair has been trading in a range between horizontal resistance and the 38.2% Fibonacci retracement level from the January 2021 lows to the November 2022 highs. The range for these two levels is between 10.1510 and 10.7800.

Source: Tradingview, Stone X

Trade USD/SEK now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a daily timeframe, one can better see the trading range that USD/SEK has been in since November 2022. Notice that the 50-Day and 200-Day Moving Averages are trading close together, a sign of indecision. In order for the pair to make its next meaning move, the pair is going to have to trade out of the range. After today’s hawkish Riksbank meeting, the pair fell nearly 2.50%. If the pair breaks 10.1510, the next support is the low from August 11^th 2022 at 9.9998, then the 50% retracement from the above-mentioned timeframe at 9.8109. However, if USD/SEK moves higher (due perhaps to a strong US CPI print on Tuesday), the top of the range trendline is at 10.7492. Above there, the pair can move to the bottom trendline of the previous long-term channel near 10.9885, then the highs of November 3^rd, 2022 at 11.2415.

Source: Tradingview, Stone X

Sweden’s Riksbank hiked rates by 50bps today and said there is more to come. In addition, it announced that it would begin QT in April. As a result, USD/SEK fell nearly 2.50%, however it still remained withing its three-month range. Continued hawkishness from the Riksbank or a higher US CPI could send the pair out of the range. After that, there is room to run on either side!

Learn more about forex trading opportunities.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.