USD/SEK Stumbles Ahead of US Retail Sales
USD/SEK is slightly softer on Wednesday as the pair pauses for breath as we countdown to this evening’s US retail sales data for July.
It’s hardly surprising the price action is slow considering last week’s riotous 4 percent rally. The Swedish Krona had been performing well before the violent spike lower against the dollar. USD/SEK dropped almost 6.5 percent between July 12 and August 10 helped by surprisingly lower-than-expected Consumer Price Index (CPI) data in the United States.
The CPI for July came in below expectations, causing the US dollar to drop considerably against its major trading pairs. However, this week several Federal Reserve speakers have indicated that the Federal Market Open Committee (FOMC) will maintain it’s hawkish rate hike path. As a result, the US dollar is back in bull mode.
Sweden’s Growth Forecast Slashed
Last week, the Swedish National Institute of Economic Research cut the country’s economic growth forecast for next year to 0.5 percent, citing the impact of inflation and interest rate rises. This is the third time the institute has lowered growth forecast since March, highlighting the worsening global outlook.
Despite predicting a sharp slowdown, Ylva Heden Westerdal, head of forecasting told reporters “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more.
US Retail Sales
Later this evening, the US Retail Sales data for July, will reveal the health the American consumer. Retail Sales reflect the change in the overall value of retail sales. It is the most important indication of consumer spending, which accounts for the vast bulk of total economic activity.
The data is forecast to grow just 0.10 percent from June’s 1.0 percent. Generally speaking, a higher than expected number should be positive for the US dollar, as it gives the FOMC more room to raise rates. By contrast, a weaker print could jeopardize the US dollar’s recent gains against the Swedish krona.
US Dollar to Swedish Krona Outlook
The daily chart highlights the dollar’s advance against the krona this year. The Swedish currency is down around 14 percent vs the greenback year-to-date. Although, it has firmed by 3.50 percent from the lowest point in July.
Nonetheless USD/SEK is above the 50, 100, and 200-Day Moving Averages (DMAs) and continues to trade with a bullish bias. For that reason, the market expects more dollar strength ahead — of course, in the near-term, this relies on a Retail sales beat.
In the event of dollar weakness, the 50-DMA at 10.25 (green line) is the first technical support. Below that the 100-DMA at 10.00 (blue line) provides additional cover.
USD/SEK Price Chart
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