EUR/SEK tumbles to monthly lows around 10.65 post-Riksbank

• EUR/SEK extends the move lower to 10.65.
• The Riksbank left the repo rate unchanged at -0.25%.
• The central bank hinted at a rate hike in December.

The Swedish Krona keeps the firm note so far on Thursday and it has dragged EUR/SEK to fresh monthly lows around 10.65 in the wake of the interest rate decision by the Riksbank.

EUR/SEK weaker on steady Riksbank

The Krona is extending the positive momentum for the sixth session in a row on Thursday, clinching at the same time fresh monthly tops vs. its European peer around 10.65.

The cross has accelerated the down move to the 10.65 region soon after breaking below the key 100-day SMA (10.6746) after the Scandinavian central bank left the repo rate intact at -0.25%, matching the broad consensus.

However, the Riksbank’s message came in on the hawkish side, catching markets off guard and leaving the door wide open for a rate hike at the December meeting despite inflation has lost some traction as of late and the economy is expanding at a somewhat lower pace.

What to look for around SEK

Despite the Riksbank kept the repo rate unchanged at -0.25% at its meeting today, it did sound unexpectedly hawkish as it emphasized the probability of rate hike at some point by year-end. In spite of some slowdown in domestic fundamentals, the overall economy remains healthy and close to the bank’s target. It appears that only a quite moderate shift to the negative side on the data flow could make the central bank revise its decision to raise rates in a couple of months. On the broader front, concerns on the US-China protracted trade war and its impact on global growth prospects remain the biggest threat for an open and small economy like the Swedish one.

EUR/SEK levels to consider

As of writing the cross is retreating 0.36% at 10.6906 and faces the next support at 10.6497 (monthly low Oct.24) seconded by 10.6099 (monthly low Sep.6) and finally 10.6015 (200-day SMA). On the upside, a break above 10.7891 (21-day SMA) would expose 10.8827 (high Oct.17) and then 10.9333 (2019 high Oct.9).