What Next For The USD/SEK Pair As Swedes Go To An Election?


Sweden is one of the most developed countries in the European Union. The country has a population of 9 million people, a GDP of $511 billion and a GDP per capita of $52,000. In January 2017, the country recorded an annualized GDP growth rate of 1.8%. Since then, this has been growing and is currently at 3.3%.

However, its currency has been among the worst performers as shown below. The USD/SEK pair has managed to move from a low of 7.84 in January, to the current level of 9.1. The declines are attributed to three reasons. First, the trade conflict that is going on around the world has significant threats to the country. This is because 45% of its income comes from exports. Second, the Riksbank has continued to retain negative interest rates even though inflation has reached its target of 2%. In the recent monetary policy statement, the bank said that:

Economic activity is strong and inflation is close to the target of 2 per cent. As earlier, however, inflationary pressures are moderate. Monetary policy needs to continue to be expansionary for inflation to remain close to target. The Executive Board has therefore decided to hold the repo rate unchanged at −0.50 per cent.

Finally, the country faces a tough election in September. This will be a tough election mostly because of the rise of the far right, which has continued to gain popularity. The right advocates for the leaving of the EU and for restrictive policies towards immigrants. This means that in the coming week, the USD/SEK pair will be one to watch.

As shown below, the USD/SEK pair has been on an upward trend this year. This has seen it form a cup pattern, as the pair tries to approach the YTD high of 9.44. As the country nears a crucial election, there is a likelihood that the upward momentum will continue. However, there is also a likelihood that the pair will fall slightly as it completes the handle part of the pattern.

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