Swedish CPIF Inflation Falls Below Expectations – Will EUR/SEK Rise Above 11.50?
Data released today reveals that Swedish CPIF inflation has dropped to 1.2%, below the expected 1.4% in August. Core CPIF, excluding energy, remains steady at 2.2%. Despite these figures, the Riksbank, much like the Fed, is not overly concerned with slight deviations in inflation rates. ING’s FX strategist Francesco Pesole suggests that minor fluctuations will likely be disregarded as the central bank aims for lower interest rates.
Market expectations are currently pricing in an 85 basis point easing by the end of the year, equating to one 25 basis point cut at each meeting (September, November, December). There is also speculation that one of these cuts could be a 50 basis point move. Riksbank Governor Eric Thedeen has hinted that three cuts are more probable than two by year-end, but the focus remains on smaller increments to avoid undue pressure on the SEK.
Despite dovish rate cuts by the Riksbank since May, the SEK has shown more resilience compared to the NOK. While EUR/SEK may rise above 11.50 in the near term, further gains may be limited unless the Fed surprises with a hawkish stance or if Trump secures a victory in the upcoming US elections.
Analysis:
The recent decline in Swedish CPIF inflation suggests a potential shift towards lower interest rates by the Riksbank. This could impact the value of EUR/SEK, with the possibility of the pair moving above 11.50 in the short term. Investors should monitor central bank decisions and global economic developments to make informed decisions regarding their finances.