Swedish Krona: Higher Oil and ECB stance pressure currency – Danske Bank
Danske Research Team explains that Sweden’s July Gross Domestic Product (GDP) indicator was weak, but underlying domestic activity appears stronger, with solid services and consumption data.
The Swedish krona (SEK) has been experiencing pressure due to higher oil prices and the stance of the European Central Bank (ECB), according to Danske Bank's research team. Although Sweden's July Gross Domestic Product (GDP) was weak at 2.5% year-on-year and -0.8% month-on-month, underlying domestic activity appears stronger, with solid services and consumption data.
Strong services activity, high retail sales, and weekly consumption data suggest growth in the domestic economy, despite manufacturing and construction remaining volatile. The Riksbank's June GDP forecast was close to the actual print, which may have raised concerns among those on the Riksbank's board who favor a more dovish approach.
However, the weak SEK, coupled with high oil prices and the rate spread versus the ECB, is unlikely to significantly impact the September rate decision. The team still expects a clear upward guidance for a hike this year, likely in November. The combination of a rising oil price and a hawkish ECB has negatively impacted the SEK, with the EUR/SEK exchange rate rising from 11.16 to 11.26.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
