The Swedish krona is not exactly on most forex traders’ minds, but with the lack of volatility in the markets, this move by SEK just cannot be ignored.
The Swedish Riksbank cut the interest rate by a surprising 0.50% to 0.25% and the currency reacted: EUR/SEK jumped from just under 9.20 to 9.3350 and is at the highest since 2011. The Sweidish currency has also seen multi-year lows against the pound and other currencies.
This move was not expected by markets and perhaps also by the governor of Governor Stefan Ingves. Both the head of the central bank and the deputy Kerstin af Jochnick wanted a cut of only 0.25% but were outvoted 4:2 by their colleagues.
But there’s a good reason: the Riksbank is missing its inflation target for over two years. Prices actualyl dropped 0.2% in May for a fifth consecutive month. And inflation for 2014 is predicted to stand at a negative 0.1%.
Unemployment is at 8%, quite high in comparison with its peers, Denmark and Norway.
And this is the screaming EUR/SEK chart:
And hopefully we’ll have some volatility with the ECB and the NFP:
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