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USDSEK Responds To Swedish Interest Rate Cut

James Boston
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The Swedish Central Bank, the Riksbank, has just announced that it has cut it’s benchmark interest rate to a record low of 0%. The 25 basis point cut to the Bank’s repo rate comes in an effort to stimulate inflation which has been running mostly negative for over a year now. There was a consensus that the Riksbank would reduce the interest rate today but most analysts forecast this to be a more measured cut of 10 basis points. The previous two monetary loosening actions came in the form of a half percent cut in July and a quarter percent cut the previous December, neither of these prior actions led to positive price growth so it is difficult to see how today’s last roll of the interest rate dice will provide any more positive results.

The move by the Riksbank comes as GDP growth appears to be picking up in this Scandinavian economy however an update to some underlying data released this morning would suggest that there is still ample room to improve. The September Retail Sales numbers are case in point, the latest reading has revealed a -0.6% fall in the figures on a month on month basis, this is a significant reversal of the 1.9% growth experienced in August, there was an expectation for a slightly more measured drop of -0.2% today. Year on year the Retail Sales figure has been shown to have grown by 2.8%, this however needs to be compared to the previous month’s reading which recorded annual growth of 4.6%, again a drop was anticipated but only to around 3.2%.

It is not all bad news however, the weakening of the Swedish Krona, it is down almost 15% against the US Dollar in the past six months, has helped the country’s trade situation. The latest Balance of Trade figures are showing a surplus of SEK 1.4Bn for the month of September, this represents a reversal of the SEK -2.8Bn deficit recorded in August.

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