Swedish Krona: Inflation surprise shifts Riksbank outlook – Danske Bank

Danske Research Team reports that softer-than-expected Swedish August inflation reduced market pricing for a September Riksbank rate hike. CPI, CPIF and CPIF-XE all undershot the bank’s forecasts, with the downside surprise described as broad-based. Markets had priced around a 30% chance of a September move, but this has largely been erased, and Danske now expects the first hike in November, with EUR/SEK under upward pressure.

Soft data delays Riksbank tightening call

"In Sweden, August flash inflation came in below expectations, with CPI at 0.28% y/y (Danske: 0.59%, prior: 0.18%), CPIF at 0.72% y/y (Danske: 1.00%, prior: 0.72%) and CPIF-XE at 0.52% y/y (Danske: 0.74%, prior: 0.57%)."

"Both goods and services came in below expectations, while food and energy were broadly in line with forecasts."

"Last week, markets were still pricing in around 30% probability of the Riksbank hiking rates in its upcoming September meeting, but most of the implied probability was erased after the release."

"We expect the Riksbank to hike rates for the first time in November."

"The lower-than-expected Swedish inflation print has put upward pressure on EUR/SEK, while the NOK is supported by higher energy prices, now trading below 10.80."