Riksbank minutes to reveal caution, implying some downside risks for the week

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 versus the EUR is expected and like owning EURSEK 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. 

"We do not exclude one additional cut by year-end, which nonetheless does little to alter our view of modest EURSEK depreciation. Next week's key event for the SEK will be the release of the Riksbank policy meeting minutes (Wednesday). In line with our previous thinking, we expect the Bank's discussion 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, we think 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," noted Barclays.

The risks to the SEK are 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.