Swedish Krona Soars After Confidence Data Trounce Estimates

Sweden’s krona soared after a report showed confidence among consumers and businesses rose more than estimated in November, prompting economists to scale back their forecasts for an interest rate cut this year.

The krona gained 0.7 percent to trade at 8.8874 per euro as of 11:02 a.m. in Stockholm. Against the dollar, the krona jumped 0.9 percent and traded at 6.5770. It was today’s biggest gainer against the euro, the dollar and the yen of the major currencies tracked by Bloomberg.

“The surprisingly strong Swedish confidence data lowers the likelihood of a Riksbank rate cut in December,” Olle Holmgren, an analyst at SEB AB in Stockholm, said in an interview. The confidence data point toward strong fourth-quarter economic growth, according to SEB.

Sweden’s central bank in October kept its main interest rate at 1 percent and signaled it will be able to start tightening policy late next year as the outlook for the largest Nordic economy improves. Gross domestic product will expand 2.6 percent next year after growing 0.7 percent in 2013, the Riksbank said Oct. 24.

An index measuring consumer confidence in November showed a reading of 104.9 today, compared with a Bloomberg survey median estimate of 102. The manufacturing confidence reading was 105.8, compared with 100.6 foreseen in the Bloomberg survey.

‘Happy Days’

“Swedish consumers see that happy days are coming,” Andreas Wallstrom, an economist at Nordea Bank AB in Stockholm, said in a note to clients. “Households became more optimistic both on their own economy and the overall Swedish economy.”

GDP grew 0.5 percent in the third quarter from the second, according to the median estimate of five economists surveyed by Bloomberg. Statistics Sweden is due to publish GDP data Nov. 29.

Sweden’s krona is also the best performer in the past week of a group of 10 currencies tracked in Bloomberg correlation weighted indexes, having appreciated 1.1 percent in the period.

Declining consumer prices in October had prompted speculation that the Riksbank may have to cut rates as early as next month. Riksbank Deputy Governor Martin Floden said today inflation last month was “very negative.” Still, there are “quite a few” positive signals in the global economy, and Sweden enjoys “good conditions for an improving economy” over the next year, he said.

Floden, together with Deputy Governor Karolina Ekholm, voted against the majority on the six-member Riksbank board last month and argued for a quarter-point rate cut.

“We are still of the view that the probability of another 25 basis point cut in December is just shy of 50 percent,” Mikael Nilsson Rosell, an economist at Barclays Plc, said in a note today.

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