Riksbank: Another hike remains an important step toward SEK strengthening – ING
|Swedish core inflation slowed more than forecast in October. SEK seems limited after the release. Economists at ING analyze Krona’s outlook.
Faster inflation decline raises doubts about hike
While CPIF inflation accelerated – once again, less than expected – from 4.0% to 4.2%, the preferred core inflation measure by the Riksbank (CPIF excluding energy) slowed sharply from 6.9% to 6.1%.
Our stance on SEK is clear. FX hedging operations are offering an edge to the Krona over other pro-cyclicals in the short term and in an improving risk environment, but those operations should end by February anyway – meaning this is not a sustainable driver of currency appreciation. In other words, another hike remains an important step toward SEK strengthening.
We are still inclined to think the Riksbank will hike next week, although we admit this is closer to a 50/50 call at this stage. Wednesday’s Prospera inflation expectations survey results will help us make a final call.
For now, SEK weakness seems limited after the inflation release, probably given expectations of Riksbank FX selling later today.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.