Currency Movements | During the month of February, the Swedish Krona (SEK) has been on a rollercoaster of a ride against the USD. The USD|SEK depreciated 2.37% to 8.22 over the course of the month, before spiking back up nearly 3% to 8.46 on the last day of February. We have now seen a boost in SEK strength today. This may be in part due Swedish based unicorn Klarna announcing their $31B valuation.
The volatility can also be partly attributed to market participants jumping back into the US market after 10-year U.S Treasury yields topped 1.4% for the first time since February 2020. It is worthwhile noting that the 10-year note is now higher than that of the S&P dividend index, which means that investors can find a decent real return when investing in U.S. bonds.
Get Hedged! | Over the past 12 months, the USD|SEK pair has seen annual volatility at 9.40%, as seen on Deaglo’s spot history chat below. If your company is exposed to this pair, implementing a Cash Flow Hedging solution can reduce your annual volatility down to 2.96%. We actually wrote a paper on this, explaining how forecasting cash flows can become far more accurate and stable.
Macroeconomic Data Front | January’s unemployment rate in Sweden was 9.3%, which underlines a worsening economy. In November, the unemployment rate was 7.7% and in December it was 8.2%. Business confidence in February jumped to 100.2 from 96.7 the previous month and retail sales year-on-year saw a huge recovery (3.1%) from the month prior (-0.9%). Sweden’s GDP growth rate year-on-year for Q4 was -2.2%; a minor increase from -2.5% in Q3. Lastly, Sweden’s balance of trade in January jumped to SEK 5.2 billion; a large influx from 1.6 billion in December.
Upcoming events likely to influence the CHF are:
Q4 Services PMI (due 03 MAR)
Q4 Current Account (due 05 MAR)
Industrial Production year on year (due 09 MAR)
Riksbank Update | Stefan Ingves, the Governor of Sweden’s central bank, made it very clear that he is far more concerned about prematurely withdrawing monetary support rather than too late, due to the severity of the Covid-19 induced crisis. The Riksbank’s is likely to therefore maintain an interest rate of zero into 2024, as inflation has remained below the 2% target. “It would be more damaging for the Swedish economy to dismantle monetary policy in its present form too early, compared to keeping it intact for somewhat too long,” Ingves said.