Riksbank is expected to announce it’s interest rate decision today and is expected to remain on hold at -0.5%. SEKOIS imply that the market has priced in Riksbank to remain on hold with a probability of 85%. Financial data and fundamentals support the case for the bank to remain on hold as well. Specifically, the inflation rate is currently at +1.7% yoy, below Riksbank’s target of +2.0% yoy and unemployment is at 6.0% evident of the existing slack in the labour market. On the fundamental side, Sweden maybe facing a housing bubble with Riksbank trying to achieve a “soft landing” of the prices. Hence, focus may shift to the accompanying statement and the press conference. The tone is expected to be neutral, maybe even a bit dovish. SEK could be weakened by the developments and some volatility could be expected upon the announcement of the rate decision.
EUR/SEK has been trading in a sideways manner the past few days, well between the 9.8594 support line and the 9.9716 resistance line. We see the case for the pair to trade sideways with a bullish sentiment in the short term, due to the fundamentals mentioned before. Should the bears get in the river’s seat, we could see the pair breaking the 9.8594 support line and aim for the 9.8035 support zone. On the other hand should the bulls take the reins, we could see the pair breaking the 9.9716 resistance line and aim for the 10.0300 resistance hurdle.