The USD/SEK currency pair extended its pullback from a 2-week low of 8.8416 on Friday ahead of the key US CPI inflation report due later today, which may provide further clues over the Fed’s monetary easing path.
Annual headline consumer inflation in the US probably eased to 2.5% in January from 2.7% in December, according to market consensus.
And, annual core CPI inflation probably eased to 2.5% in January from 2.6% in December.
The US Dollar has received support after stronger-than-expected US labor data prompted investors to pare back expectations of near-term Federal Reserve rate cuts.
The US economy added 130,000 jobs in January, a figure that topped expectations of 70,000, following a revised 48,000 job growth in December.
As a result, markets are now pricing in a 95% chance that the Fed will hold rates steady in March. Yet, investors still expect two 25 basis point rate cuts later this year, with the first likely in June.
Meanwhile, in Sweden, annual inflation has accelerated to 0.4% in January from 0.3% in December, preliminary data showed earlier this week.
And, Sweden’s consumer price index with a fixed interest rate (CPIF), Riksbank’s target variable for inflation, went up 2% year-on-year in January, easing from 2.1% YoY in December.
Riksbank left its key policy rate intact at 1.75% at its January meeting.
Policy makers again indicated that borrowing costs would likely remain at this level for some time, as they assess the impact of the current policy stance.
Still, Riksbank warned that uncertainty over inflation and growth had risen, driven in part by geopolitical tensions and shifts in US trade and foreign policy.
The USD/SEK currency pair was last up 0.21% on the day to trade at 8.9272.
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