USD/SEK analysis: USD vs krona outlook ahead of US CPI data

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on Jan 10, 2024
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  • The USD/SEK price moved sideways after the weak Swedish GDP numbers.
  • The Riksbank is expected to stop its forex interventions in February.
  • The US will publish the latest consumer inflation data on Thursday.

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The USD/SEK exchange rate remained in a tight range after a series of weak Swedish economic numbers. The pair was trading at 10.22, where it has been in the past few days. This price is a few points above last week’s low of 9.90 and 9.35% below the highest point in November.

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Swedish and US economic data

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The latest economic numbers from Sweden showed that the country is not doing well. In a report, the statistics agency said that retail sales retreated by 0.5% in November after growing by 1.4% in the previous month. This retreat translated to a 1.7% YoY decline. The retail sector is watched closel because consumer spending is the biggest part of the Swedish economy.

Another report revealed that household confidence remained under pressure. It dropped by 0.5% in November after growing by 0.5% in the previous month. This report could have an impact on consumer spending in Sweden.

Sweden’s industrial production was also under pressure in November as it dropped by 1.1% after growing by 0.3% in the previous month. All in all, the country’s economy expanded by 0.2% after growing by 1.0% in October.

These numbers will likely put pressure on the Riksbank, which hiked interest rates to 4% in a bid to slow the economy. Most importantly, the central bank has been supporting the krona through FX sales in the past few months. In a note, analysts at ING estimated that the bank will stop the FX support of the currency. A Riksbank executive said:

“The Riksbank does not have a target for the krona, we have a target for inflation. But the exchange rate affects the inflation outlook and therefore we need to monitor it closely.”

The next important catalyst for the USD/SEK will be the upcoming US inflation numbers. Economists polled by Reuters expect the data to show that the country’s inflation held steady in December. In this, they see the headline CPI coming in at 3.2% and core CPI falling to 3.8%.

These are important numbers because they influence the upcoming Fed meetings. A lower-than-expected inflation report will point to a Fed rate cut in March this year. A higher report will shift focus to either May or June.

USD/SEK technical analysis

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USD/SEK

USD/SEK chart by TradingView

The USD to krona has been in a downtrend in the past few months, helped by the Riskbank support and the US dollar index (DXY) retreat. It dropped from a high of 11.27 in September to a low of 9.90. The pair has remained below the 50-day and 100-day Exponential Moving Averages (EMA). 

Most recently, the pair has retested the key support at 10.18, the lowest swing on July 17th. Therefore, the outlook for the USDSEK pair is bearish, with the next point to watch being at 9.90.

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