Here’s why the USD/SEK rose after the Riksbank interest rate decision

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jul 1, 2021
  • The USD/SEK pair rose after the latest Riksbank interest rate decision.
  • The bank left interest rates and quantitative easing (QE) policies unchanged.
  • The pair rose because of the emerging gap between the Fed and Riksbank.

The USD/SEK pair rose slightly after the latest Riksbank interest rate decision. The pair rose to 8.5856, which was the highest level since June 21. It has risen by more than 4% from the lowest level in June.

USD/SEK
USD/SEK chart

Riksbank interest rate decision

The Swedish Central Bank made a relatively muted interest rate decision on Wednesday. The bank left interest rates unchanged at 0% and hinted that they will remain low until 2024. It will also continue its quantitative easing (QE) program until the limit reaches SEK 700 billion. 

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In the statement, the bank said that it expects that the country’s economy will grow by 4.2%, which was higher than the previous estimate of 3.7%. The members also warned that the bank could keep rates lower for longer if the number of coronavirus cases keep rising. The bank said:

“The Executive Board may cut the repo rate or in some other way make monetary policy more expansionary if inflation prospects weaken. This applies in particular if confidence in the inflation target were to be under threat.”

According to Bloomberg, the dovish statement was likely because members wanted to avoid its past mistake when it hiked too fast. In their comments, analysts at ING wrote that:

“And despite some near-term volatility in the CPIF numbers, the overriding story is that the central bank now only expects inflation to be at or above 2% for one month out of the next 33.”

Looking ahead, the USD/SEK pair will react to the latest US employment numbers that will come out tomorrow. Analysts expect the non-farm payrolls (NFP) to come in at more than 700k as the country continued to recover. They also expect that the unemployment rate dropped to 5.7% in the previous month. 

As such, the USD/SEK rose because of the divergent path between Riksbank and the Fed. While the Riksbank has turned dovish, the Fed delivered a hawkish statement two weeks ago.

USD/SEK technical analysis

USD/SEK
USD/SEK technical chart

The four-hour chart shows that the USDSEK pair has been in a strong bullish trend. It has moved above the first support of the Andrews pitchfork indicator. It has also risen above the 61.8% Fibonacci retracement level. The pair has also moved above the 15-day and 25-day exponential moving averages (EMA). Therefore, the pair will likely keep rising as bulls target the next key resistance at 8.700.

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