Inflation in focus for Sweden

Inflation data in Sweden will likely drive the price action for the Scandies in the coming week. Poor liquidity of Scandinavian currencies over the summer has contributed to modest EUR/SEK appreciation, significantly above recent range highs, and has caused the SEK REER to test its all-time lows. 

"As highlighted repeatedly, extreme SEK undervaluation is continued to be seen as temporary. Nonetheless, staying on the sidelines is preferable for now, respecting the recent price action and illiquidity. For the week ahead, CPIF inflation is expected to increase by 0.7% y/y", says Barclays. 

Market expectations are also for an unchanged CPI inflation print relative to June. Equally important, TNS Sifo Prospera will be publishing its monthly report on Swedish inflation expectations. 

"In line with recent upticks, a modest rebound in medium- and longer-term inflation expectations is continued to be expected, which, in combination with the recent better-than-expected Swedish growth data and SEK weakness, should give some comfort to the Riksbank regarding the efficacy of its already hyper-accommodative policies", added Barclays.