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Krona strength may resurface
Market Insight – Foreign Exchange – Krona strength may resurface
Swedish economy surpasses expectations
Krona strength may resurface. Swedish growth and underlying inflation have continued to develop strongly, rising to the highest levels in over four years and beating expectations of both its own central bank (Sveriges Riksbank or the “Riksbank”), and the market consensus (see Figure 1). Yet, the EUR/SEK currency pair has risen almost 1.8%* in the past month (SEK weakening), as accommodative monetary measures aimed at limiting Krona strength have been successful. However, at the last two monetary policy meetings, there have been increasing signs that members of the Riksbank’s Executive Board view further monetary easing as unnecessary, especially given the strong outperformance of the Swedish economy and the improving financial environment. Data due in the next three weeks1 will likely reaffirm these views and potentially reduce expectations of intervention. This may remove upward momentum for the EUR/SEK and potentially cause the pair to reverse recent gains.
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Board members voice differing views
The Riksbank cut its benchmark interest rate to -0.5% in February and expanded its asset purchase programme by SEK45bn (US$4.8bn) at its April meeting. The measures were taken to ensure weakness of the Krona and reinforce its important contribution in helping lift inflation. At the last two meetings, Executive Board members have dissented when voting for additional monetary measures, or expressed a more conservative view as to the appropriate course of action. In the absence of a significant catalyst, further monetary measures to weaken the SEK are likely to be met with resistance, especially if upcoming growth and inflation data (due on the 30th May and 14th June respectively) surprise to the upside.
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Resistance ahead
The EUR/SEK is moving towards the higher end of its recent 9.15-9.5 range. Should the pair approach its 2016 high of 9.5046* then it is likely that it will face resistance (see Figure 2). This is because at such levels the Krona weakness would sit in stark contrast to the significant outperformance of the Swedish economy relative to its European peers. In Q4 15, Sweden’s GDP growth was 4.5%*, almost three times that of the Euro Area over the same period.
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Digital assets continue to have a positive outlook in 2025 as the US regulatory and political environments aggressively shift to a pro-crypto stance. On March 6, President Trump signed an executive order establishing a Strategic Bitcoin Reserve and Digital Asset Stockpile.
Market Highlights
Bitcoin Strategic Reserve and crypto stockpile
The Bitcoin Reserve will be capitalized with BTC owned by the Department of Treasury, which could further increase via new budget-neutral acquisitions. The crypto stockpile will also include assets owned by the Treasury, without the possibility of future buys, with potential sells coming from strategic management of the stockpile.
This marks a major milestone for digital assets, with the US government starting to integrate major crypto assets, and continues the new administration’s work to lead the global crypto economy.
White house hosts first crypto summit
On March 7, the White House hosted the first Crypto Summit, bringing together key figures from the crypto industry and government officials to discuss the future of digital assets in the United States.
This underscores a shift towards a more collaborative approach to crypto regulation paving the way for more robust integration in the future.
SEC drops investigations on crypto companies
The SEC dropped investigations against Consensys and Yuga Labs, adding to recent dismissals against Coinbase, Kraken and Uniswap.
This highlights the new administration stance against regulation by enforcement of blockchain companies and investors.
Market Metrics
The NCITM faced challenges due to market uncertainty surrounding the escalation of a trade war, ending the week down 15% and underperforming other asset classes. Gold (+11%), in contrast, became the best-performing asset year-to-date, surpassing EWZ (+10.3%). Despite the recent negative momentum for the NCITM, crypto fundamentals continue to strengthen, as highlighted by Trump’s latest executive order, encouraging signs that could revert the negative trend of the past several weeks as we progress into 2025.
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