The Swedish krona has been on its back foot versus the euro and yesterday’s decline in retail sales shows a considerable drop in activity. The report overshadowed the stability that was added to the country’s central bank the as Chairman Stefan Ingves was re-elected to another 6-year term as head of the Riksbank.
The krona has struggled to find footing versus the euro and yesterday was no different. Swedish retail sales numbers for the month of May contracted from the previous year by -1.1%. The data was off from the April numbers which showed a sharp 5.6% y/y gain.
The negative retail sales report overshadowed the additional 6-year term that was granted to current Chairman of the Riksbank Stefan Ingves. Despite the fact that 6-months remain in his current term, the Riksbank was out in front of the markets to announce Invges’ extension. This will provide a level of stability for the Swedish central bank and serve to underline its independence from Swedish political pressures. Such a situation is needed for proper management of Swedish monetary policy which faces rising inflationary pressures due to strong economic growth and rising wages.
Turning to the charts, the euro has just about retraced the entire move lower from the 2010 November high. The pair found support at the 9.1200 level and the next target for the EUR/SEK looks to be the 9.4250 off of the Q4 high.
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