The Riksbank yesterday hiked rates by 25bps and said that the pace of rate hikes was likely to increase. There is a strong trend in this market. The EUR has rallied on optimism about the next rescue package — due by the end of March — and rising expectations of rate hikes, but political reality seems to be reasserting itself and politicians seem to be gearing up to disappoint the market, and I think that the probability of rate hikes is low. The EUR has recently been falling back because of these factors. Such has been the strength of the SEK that the EUR’s rally has not really been visible in this market, and if the SEK now get stronger and the EUR falls back then EUR/SEK should drop. So there is a trend, there is a breakout, and while a lot of tightening may be in the SEK already the increasing pace of rate hikes and the likely weakness of the EUR provide something new for the market to react to.

The rather muted reaction so far may be down to the fact that the committee split 4-2 in favour of the increase, adding an element of uncertainty into the future rate path. A reversal on the committee remains a risk.

I have placed a stop at 1.5 ATR as wider stops have been better in this downtrend (middle chart, top red line) than 1 ATR stops (bottom chart, top red line).