Norges Bank surprisingly refrained from cutting its deposit rates lower from 1.25%, following the unscheduled 15 basis cut from the Riksbank yesterday.
“There are prospects for a reduction in the key policy rate” said Norges Bank governor Olsen (pictured), especially to sustain Norwegian economy from low oil prices.
EUR/NOK plunged to 8.6474 post-decision, pulling out the 100, 50 day moving averages in a single move. The EUR negative sentiment should pave the way toward the 200-dma (8.5173), that has lately acted as support in March 5/6th.
In Sweden, the Riksbank cut the repo rate from -0.10% to -0.25% in an unscheduled meeting yesterday and announced to extend its government bond purchases by 30 billion to 40 billion SEK.
The disinflation in the eurozone, lower oil prices and the delay in economic recovery almost guarantee that the inflation will miss the bank’s 2.0% by far, despite the slight pick-up lately.
“There are signs that inflation has bottomed out and is beginning to rise, but the recent appreciation of the krona risks breaking this trend” says the bank.
This week surprise action reinforces the credibility of Riksbank’s position against any SEK appreciation verse EUR. EUR/SEK has bottomed at 9.0552 on March 12th amid the heavy sell-off across the EUR-complex accelerated the fall.
The ongoing downside risks on EUR signals a challenging upside, while the recent Riksbank cut should allow the EUR/SEK to take a breather in the short-run. As knee-jerk reaction, EUR/SEK rallied from 9.1591 to 9.3613, the MACD stepped in the green zone. Lower SEK rates should build a bottom at 9.20/30 region (including option bids, Fib 23.6% on both Oct’14-Dec’14 rally and Dec’14-Mar’15 sell-off and the 200-dma) should the EUR sell-off eases amid the FOMC relief.
Ipek Ozkardeskaya is market analyst at Swissquote Bank.