Riksbank minutes to reveal caution

The SEK appreciated markedly last week owing to an unexpected upward revision in Q2 GDP growth, with the Riksbank's KIX index now trading near year-to-date highs despite softer-than-expected August inflation. Despite the Bank's clear discomfort with sustained SEK appreciation, modest SEK outperformance is expected versus the EUR and like owning EUR/SEK downside via options. 

"However, there is the risk that the Riksbank may have to respond to international developments, including additional easing by the ECB in the coming months. As such, one additional cut by year-end is also likely, which nonetheless does little to alter our view of modest EURSEK depreciation", says Barclays. 

Next week's key event for the SEK will be the release of the Riksbank policy meeting minutes. The Bank's discussion is expected to have revolved around the decent evolution of inflation and growth dynamics, owing mainly to the efficacy of the Bank's current monetary policy. 

Nonetheless, the Bank will come across as rather cautious, given increased financial volatility amid international growth concerns, and express its willingness and readiness to ease conditions further if the rebound in inflation proves more sluggish than it currently envisions. 

"As a result, the risks to the SEK are likely skewed slightly to the downside heading into the release of the policy minutes but that the currency will continue its modest appreciation in the coming months", added Barclays.