The Swedish krona surged on news that the country’s economy expanded quicker than expected last quarter.
The nation’s gross domestic product grew 1.1 percent in the fourth quarter, beating the economists’ estimate of 0.5 percent growth rate, reported the statistics agency on Friday. The krona rallied up to 1 percent versus the euro before easing 0.6 percent higher at 9.3566 per euro. It also rose 0.8 percent to trade at 8.3391 versus the dollar.
“The central bank is now in a dilemma,” Magnus Alvesson, the head of economic research at Swedbank AB, told Bloomberg News. “On the one hand, the Swedish economy is strengthening, and on the other hand the krona is strengthening, which pushes down inflation pressure in Sweden.”
Sweden’s central bank reduced its benchmark interest rate to less than zero his month, an historic feat, and rolled out bond purchasing program in order to combat the stubborn deflation. The Riksbank Governor Stefan Ingves hinted that further measures would be rolled out if necessary.
The Swedish economy has been weighed down by slow demand from Europe, which is its biggest trading partner. However, this has been managed by lower interest rates that have boosted domestic spending. The central bank forecasts the economy to grow 2.7 percent in 2015 and 3.3 percent next year. Consumer prices are expected to grow 0.1 percent this year, against the Riksbank’s 2 percent goal.
Elsewhere, Denmark’s economy expanded 0.4 percent in the fourth quarter, exceeding economists’ prediction by four times. This was the nation’s sixth straight quarter of expansion, the longest in 10 years, reported the statistics agency in Copenhagen. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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