Sweden’s unemployment rate unexpectedly spiked to a four-year high in August, raising questions around the central bank’s plans to hike interest rates and driving the krona lower.
The seasonally-adjusted jobless rate jumped to 7.4%, much worse than the 6.8% reading in a Bloomberg survey of economist estimates. The news, which resulted in a 0.8% decline in the krona against the euro, was quickly dubbed “a catastrophe” by Martin Enlund, a currency strategist at Nordea Bank Abp in Stockholm.
At Svenska Handelsbanken AB, Head of Trading Strategy Claes Mahlen said the data “adds to our view that Riksbank will ultimately call off planned rate rises.”
The latest jobless report is bad news for Finance Minister Magdalena Andersson, who is due to present the 2020 budget on Wednesday. It will also make it harder for the Riksbank to commit to its plan to raise interest rates again around the turn of the year.
Most economists expect Riksbank policy makers to adjust their forward guidance to take the global monetary environment and weaker economic conditions into account. According to GDP data published last week, Sweden’s trade-dependent economy all but stalled in the first half of the year.
In its analysis of the unemployment report, SEB AB said it seems that “there is more weakness behind these numbers than just uncertain summer months. The Riksbank will have to adjust its forecast upwards.”forex.com
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