EUR/SEK uptrend gears up on likely Riksbank rate cut despite lower inflation forecast

In the Scandi FX market, it is time for this week's key data releases. In Sweden the NIER's inflation forecast is an important driver for expectations on additional Riksbank easing. Our base case remains that the Riksbank will stay on hold next week, due to the higher-than-expected July CPI reading and the weak SEK. However, we acknowledge that the risk has increased that the Riksbank will cut rates on the back of global turmoil and the plunge in energy prices that further challenges the Riksbank's aggressive inflation forecast.

While on the flip side, other data releases such as retail sales, consumer confidence, trade balance and current account to set up right path for Swedish economy. All these data announcements are lined up in 1st week of September which is likely to print good set of numbers.

The Riksbank rate cut would probably send EUR/SEK higher as the market is not priced for Riksbank easing. However, we think that any EUR/SEK bounce will be temporary. We maintain our medium-term bullish view on the SEK forecasting a gradual move lower in EUR/SEK towards 9.40 in 1M and 3M, 9.30 in 6M and 9.00 in 12M.