The dollar strikes backBy Arnaud Masset
The greenback took its revenge, as it reversed the last weeks’ losses against all G10 peers. On the last trading session of the week, the buck rose 0.25% against the euro, the Kiwi and the Aussie. Safe haven currencies such as the Swiss franc and the Japanese yen resisted the pressure better. We are positive on the dollar, but it is time for a consolidation, especially after such a sharp rally.
Investors are finally feeling more confident about the US economy, especially inflation, as the US Federal Reserve Bank moves closer to its target. The Fed seem confident it can gradually tighten without triggering an unexpected rise in inflation. The job market is doing just fine, growth is solid – even though a slight slowdown is expected in the first quarter – and most importantly, inflation is moving in the right direction.
Today’s economic calendar is busy in the US: an advance estimate of Q1 GDP growth, personal consumption, core PCE and the Michigan Sentiment Index. UK’s Q1 GDP growth is also due for release today, while the Bank of Japan already released its quarterly economic outlook report this morning. Next week will also be busy. Monday will see March personal income and spending. April’s ISM manufacturing will be publish on Tuesday, while the Fed will communicate its decision about interest rates on Wednesday. This will be a non-event, as there won’t be a press conference.
Sweden kicks the krona
By Vincent-Frédéric Mivelaz
It’s weakened nearly 10% against the euro since August 2017, and yesterday Sweden’s central bank kicked the krona further. The Riksbank maintained its key interest rate at -0.50% (unchanged since February 2016), against market expectations of a 0.25% rise. The bank noted March inflation data being weaker than expected, at 0.30% and 1.90% (prior: 0.70% and 1.60%) on month-over-month and year-on-year bases.
The EUR/SEK pair is trading at its September 2009 level, 10.5446. There is a long way to go before reaching strong resistance at 11.16 (23 June 2009 high). The pair is heading to the 10.55 range short-term.
As Sweden’s economy recovers from recent lows, with a March trade balance in negative territory for three months in a row, we assume that the Riksbank normalisation policy start won’t take long, unless the ECB maintains its stance, a likely scenario since Draghi’s statement yesterday about a Eurozone economy slowdown.