SEK under pressure against EUR- BBH

The Swedish krona is losing to the euro today after Sweden reported softer than expected inflation figures and weaker house prices, points out the research team at BBH.  

Key Quotes

“The euro is making new multiyear highs against the krona today, reaching almost SEK10.38.  Note that the SEK10.41 area corresponds to a 61.8% retracement of the euro's decline from the 2009 high near SEK11.79.”

“Sweden's Riksbank has had negative rates for three years, and it is still not satisfied with its inflation results.  The headline and underlying inflation (using fixed interest rates) rose but not as much as expected.  The headline rate rose 0.3% m/m and 1.9% y/y, rather than 2.0%-2.1% that economists expected.  The underlying rate also rose 0.3%, with the y/y rate rising to 2.0% from 1.7%.”

“Although the Norwegian krone and Swedish krona are typically highly correlated, Norway has been outperforming Sweden significantly this year.  The krona is the weakest major currency this year, losing 2.7% against the dollar, while the krone has gained 5.3%.  News that Norway's airline may the target of an acquisition by the UK's IAG may be helping to underpin the krone today, which is stronger than the euro even if weaker than the dollar.”

“Higher oil prices may also be a factor.  Oil prices hit a three-year high yesterday and are broadly steady today.  Geopolitical tensions dominate.  A strike on Syria could disrupt supplies.  Venezuela's output seems nearly in free-fall, and Iran could see renewed sanctions.  Last month, the IEA noted that as of late January, oil inventories were 53 mln barrels above the five-year average compared with 302 mln barrels a year before.   That said, the US reported that its inventories rose 3.3 mln barrels last week, while the market had expected a little more than a mln barrel drawdown.”