SPECULATION about Swedish interest rates and growth has pushed the Swedish krona to a 10-year high against the euro. The krona has been attracting investors as Sweden’s budget surplus in January came in higher than forecasts and the belief is that interest rates will rise faster than the Eurozone. This has been a long lasting trend but on the hourly chart euro-krona has just broken back above its 20-period moving average. This is a sign a rebound could be imminent. Capital Spreads quotes a price of 8.7657kr–8.7737kr.

A successful auction of Greek T-bonds yesterday helped bolster confidence in the euro although euro-dollar remains somewhat below last week's highs. Although on the face of it the Eurozone sovereign debt concerns do seem to be fading, there's clearly still a lot of battles to be fought by those nations on the periphery to get spending under control. This could easily ensure gains remain modest for the time being. The current IG Index price on euro-dollar is $1.3660-$1.3662.

Since a weather-driven GDP contraction in the fourth quarter of 2010, sterling pairs have rallied strongly – all against a backdrop of continuously elevated inflation. This month’s MPC’s decision will be crucial not only for the economy but also for the Bank’s credibility. In the recent past, the MPC has not shied away from surprising against all expectations which indicates a willingness to act, even if that action creates adverse volatility in the financial markets.

Futures markets are pricing in a 20 per cent chance of a rate rise this week and a 100 per cent chance of a hike by 5 May. Price action is likely to be most extensive in sterling-yen and euro-sterling given Japan’s ultra-low policy stance and the European Central Bank’s hesitation to take firmer policy steps last week. The Alpari UK spread on euro-sterling is £0.8484–£0.8486. On sterling-yen, Alpari UK offers a spread of ¥132.45–¥132.47.