- The USD/SEK was little changed after the statistics office released weak employment numbers.
- The unemployment rate rose to 8.2% as companies laid-off employees due to coronavirus.
- The data came as the Riksbank is battling parliamentarians on the legality of its QE program.
The USD/SEK pair was little changed as the market reacted to the new jobs numbers from Sweden. The pair is trading at 9.6865 while the EUR/SEK is unchanged at 10.5378.
Sweden jobs data disappoint
The Swedish labour market deteriorated in April, according to the statistics office. The number of people in the workforce declined by 99,000 to 5 million as the coronavirus pandemic affected the country.
The unemployment rate increased by 1.4% to 8.2% as the number of the unemployed rose by 80,000 to 449,000. Also, the number of hours worked tanked by 11.2% in April while the participation rate declined by 0.9% to 72.7%.
The unemployment rate measures the number of people of working age who are not employed and those who are actively looking for work. The participation rate, on the other hand, measures the number of people who are working or actively looking for work.
According to the statistics office, there were more than 4.46 employees in Sweden. Most of these were employed on a permanent basis while 654,000 were temporary workers.
The hotel and restaurants industry saw the biggest decrease in hours worked. That was followed by the personal and cultural services, trade, manufacturing, and financial sector.
These numbers came a week after the office released disappointing capacity utilisation data. The utilisation declined by 0.2% in the first quarter compared with Q4’19. This decline meant that capacity utilisation was about 89.2% on a seasonally adjusted basis.
High unemployment rate points to severe recession
Sweden has been in the headlines following its unconventional response to the pandemic. The country refused to shut-down schools and businesses.
As a result, the country has recorded more infections than its Scandinavian peers. The country has confirmed more than 2,300 deaths compared to Denmark, Norway, and Finland. The three countries have recorded less than 1,000 deaths.
Similarly, the unconventional approach did not prevent the country from going through a recession. According to the finance minister, the country will shrink by 7 per cent this year. That will be the worst slowdown since the second world war. Besides, more than 40 per cent of companies in the services sector are facing bankruptcy.
The USD/SEK pair has also been responding to the challenges facing Riksbank. The bank slashed interest rates to near zero and started a quantitative easing program worth more than $30 billion. As part of this QE, the bank is buying government bonds and billions of high grade corporate bonds.
However, the bank has faced challenges with members of parliament. Members have raised questions about whether it is legal for the central bank to buy into corporate bonds.
In response, the bank hired Blackrock, the biggest investment manager in the world. The company is also helping the Federal Reserve to navigate the murky waters of corporate bonds market.
USD/SEK technical outlook
The USD/SEK is trading at 9.6843, which is slightly higher than last week’s low of 9.4655. This price is also significantly lower than the YTD high of 10.4642. On the daily chart, the price is below the 100-day and 50-day exponential moving average while the RSI has been declining. The pair may remain in a downward trend as bulls attempt to move below the important support at 9.5500.