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The Riksbank kept its policy rate on hold, but expanded its QE program and cut the lending rate for banks. The SEK largely ignored this decision as FX investors remain focused on broader shifts in risk appetite, therefore, economists at TD Securities expect the EUR/SEK pair to trade within the 10.35-10.60 range.

Key quotes

The Riksbank left its policy rate unchanged at 0.00% today, as had been fully expected. But it did surprise markets in announcing a number of other measures: the stock of asset purchases was expanded to SEK 500 billion, through June 2021 and the interest rate to loans for banks was lowered, both for the standing loan facility and the weekly extraordinary loans. The maturity on loans to banks for onward lending to companies was extended from 2 years to 4 years. 

“It looks like the Riksbank had decided to follow in the footsteps of the ECB, ensuring ample stimulus for the next year, rather than the more hawkish Norges Bank, which had a hiking cycle beginning around the end of 2022.”

“The SEK completely shrugged off the Riksbank’s notable expansion of its policy support measures. EUR/SEK went into the July meeting near the midpoint of the wide 10.35/10.60 range in place over the last 6-7 weeks. The policy decision did little to upset the consolidative tone seen in recent days.”