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Jane Foley, head of FX strategy at Rabobank, suggests that by hiking rates and ending the era of negative interest rates, the Riksbank has sparked a discussion as to whether other central banks will follow-suit.

Key Quotes

“The Riksbank had been handed a policy advantage insofar as the SEK had been on a depreciating trend since 2016. This has allowed policymakers to move rates to stem the impact of the side-effects of negative rates such as house price inflation and the high level of household debt and the pressure on the banking sector. That said, in an environment of slowing growth, the rate hike is still a risk.”

“We expect some gentle appreciation of the SEK vs. the EUR in the coming months.”