EUR/SEK dips to two-week lows near 10.65 post-Riksbank

• EUR/SEK loses the grip and drops to 10.65.
• Sweden Industrial Production expanded 3.2% MoM.
• The Riksbank kept the key interest rate unchanged at -0.25%.

The Swedish Krona is extending its upside momentum so far this week and is now dragging EUR/SEK to fresh two-week lows in the 10.65 neighbourhood.

EUR/SEK weaker on Riksbank, positive data

The Krona gathered extra steam on Thursday after the Riksbank left unchanged the repo rate at -0.25% at today’s meeting, broadly in line with previous estimates.

The Scandinavian central bank also revised down the interest rate path although it surprised markets after keeping unchanged the view of higher rates at some point by year-end or early 2020. In fact, the central bank expects the repo rate to run at an average of -0.23% in Q4 2019, 0.04% in Q3 2020 and 0.20% in Q3 2020.

In addition, the Riksbank now sees the domestic economy expanding 1.5% in 2020 (from 1.6%) while the unemployment is expected to tick higher to 6.7% (from 6.5%) in the same period.

Still in Sweden, Industrial Production expanded 3.2% MoM in July and 1.2% from a year earlier. Industrial New Orders reversed the previous expansion and contracted at an annualized 2.2% during the same period. Data from earlier in the week showed the Current Account surplus shrunk to SEK37.0 billion in Q2 and the manufacturing PMI improved to 52.4 during last month.

What to look for around SEK

Matching the broad consensus, the Riksbank kept the repo rate unchanged at -0.25% today. However, the central bank sounded surprisingly hawkish as it kept on the table a potential rate hike in Q4 2019 or early 2020 in spite of revising lower the rate path. Despite the economy looks healthy and fundamentals remain pretty solid, the central banks appears too optimistic in light of the potential negative impact of the intensification of the US-China trade war on a small and open economy like the Swedish one. Time will tell.

EUR/SEK levels to consider

As of writing the cross is losing 0.61% at 10.6662 and faces the next support at 10.6364 (55-day SMA) seconded by 10.6019 (low Aug.14) and finally 10.5174 (200-day SMA). On the upside, a breakout of 10.8373 (high Aug.7) would open the door to 10.8498 (2019 high May 13) and then 10.8554 (2019 high Aug.30).