The Pound (GBP) to Swedish Krona (SEK) exchange rate soared to its highest level since 2009 on Tuesday after the Swedish Central Bank (Riksbank) shocked the markets by cutting interest rates to a new record low level of 0%.
In what was a busy session for the Swedish currency in terms of economic data releases it was the shock announcement by the Riksbank that sent the Swedish Krona tumbling against all of its most traded peers. It fell sharply against the Euro to a four-month low, and against the US Dollar, it tumbled to a four-year low.
Most economists had been forecasting for the Riksbank to lower interest rates to a level of 0.1% from the previous rate figure of 0.25%. The drop was expected as the bank has been trying to fight the threat posed by deflation.
Instead, the bank stunned the markets by going a step further by cutting rates to zero and suggested that the zero rate cold remain low for the near future.
‘Reading between the lines, it looks like Riksbank will keep interest rates low until inflation goes back to 2%. This will weigh on the Swedish Kroan, with most losses likely to come against the Dollar. The Euro should top out at 9.50 Crowns,’ said Carl Hammer, chief currency strategist at Stockholm based SEB.
The Swedish Krona was also weakened by disappointing economic data.
According to Statistics Sweden, retail sales in the Scandinavian nation fell more than expected in September. Retail sales volume declined by 0.6% on a month on month basis in September from the 1.7% increase recorded in August. The drop was more than the 0.5% dip forecast by economists.
On an annual basis, retail sales increased by 2.8%, which was less than the 3.2% rise expected by economists and the 4.7% growth in the previous month. Sales of consumable goods climbed by 1.6% annually and durable goods sales, climbed by 3.8%.
Producer Price Inflation also declined more than forecast in September. On a monthly basis PPI declined by -0.3% from 1% and on a yearly basis PPI declined from the previous figure of 2.7% to 1.7%.
The Pound was able to make gains against the Krona despite being weakened against other peers. Comments made by Bank of England (BoE) Deputy Governor Minouche Shafik weighed upon the currency. In an interview with the Financial
Times Shafik said that she sees no reason for the Bank to raise interest rates as price pressures continue to build.
Swedish Krona (SEK) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,Swedish Krona,11.8626 ,
Euro,,Swedish Krona,9.3471 ,
US Dollar,,Swedish krona,7.3623 ,
[/table]
