The Riksbank has put a lot of focus on inflation. Swedish core inflation is running at0.0%, which is well below the Riksbank’s forecast and way below the 2.0% inflationtarget. However, we now expects a temporary pick-up in Swedish inflation in April.The core measure is expected to rise to 0.5% y/y and the gap to the Riksbank inflationforecast is expected to narrow to 0.2 percentage point.
The inflation numbers might give some temporary support to the SEK, but go longEUR/SEK (or alternatively NOK/SEK) if we see a test of 8.95 in EUR/SEK this week.
Norges Bank is tapping for the third time in the new 10Y benchmark ahead of thecoupons between May 15 to May 25. The Norwegian bonds have not been able tofollow German government bonds in the recent rally after the ECB meeting, but thespread widening has been very modest. We expect that the NGBs will catch up afterthe auction next week given both the coupon money and the attractiveness of thecurrency after the upbeat rhetoric from Norges Bank last week.
In Denmark, it will be also worth keeping a special eye on inflation. We estimateprices rose 0.1% m/m and 0.7% y/y in April, compared with 0.1% m/m and 0.4% y/yin March. The rise in the annual rate is due chiefly to the base effect of falling pricesin April last year.
Read the full report: FX Daily
Danske Bank