Krona Jumps Amid Bets Riksbank Won’t Cut Rates: Stockholm MoverNiklas Magnusson
Sweden’s krona surged the most in a month against the euro as the pace of recovery in the largest Nordic economy fuels bets the central bank won’t need to cut interest rates at its next meeting.
The krona appreciated as much as 0.7 percent against the euro, more than any major currency tracked by Bloomberg. It traded at 8.6019 against the single currency as of 10:24 a.m. in Stockholm. Against the dollar, it rose as much as 0.8 percent.
Sweden’s gross domestic product expanded 0.6 percent in the three months through March, double the median estimate in a Bloomberg survey. Riksbank Deputy Governor Per Jansson -- one of six board members -- said last week the first-quarter growth figures will be “very important” in shaping a decision at the bank’s July 2 meeting.
“Overall data had been somewhat soft recently and hence a higher probability of a rate cut by the Riksbank was priced in, but with today’s stronger-than-expected data, some of that probability has been priced out,” Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S in Copenhagen, said in a telephone interview.
Sweden’s central bank said last month it probably will keep its repo rate at 1 percent in July. At the same time, the bank signalled it can’t rule out a fifth rate cut since 2011. Policy makers are trying to spur inflation closer to a 2 percent target without fueling household credit growth.
Today’s headline GDP figures may be misleading, according to Torbjoern Isaksson, chief analyst at Nordea Bank AB.
Though the data were “much stronger than expected,” they “are weaker than they look at first glance,” Isaksson said in a note. Inventories improved the annual GDP number by 0.7 percentage point, and will probably weigh on growth in coming quarters, he said. Though household demand was “strong,” investments declined 7.2 percent, he said.
“All in all, the global slowdown is hitting the export industry with full force,” Isaksson said. “Households are well off while investments and inventories are sources of concern.”
Even taking the possible signs of weakness into account, today’s report “reduces the probability of Riksbank cutting rates further,” he said.