SEK: Inflection point fast approaching

Swedish labour market data (Monday) and the Economic Tendency Survey (Wednesday) will be the key drivers for the SEK in the coming week and are expected to keep the upward momentum on the currency following last week's positive inflation report and the encouraging uptick in medium-term inflation expectations. 

Market participants expect a modest decline in the unemployment rate to 7.7%, from 7.8% in April, and look for an increase in consumer and manufacturing confidence indicators to 99.8 from 98.8 and 101.3 from 100.5, respectively. 

In addition, the NIER publication of economic forecasts (Wednesday) should also garner considerable attention, likely flagging upside risks to Swedish growth. SEK is approaching an inflection point helped by improving Swedish economic outlook. 

"We recommend being short EURSEK targeting 8.90 on the back of superior growth relative to the euro area and widening interest rate differentials, which we show are an important driver for EURSEK returns",said Barclays in a report on Monday.