Swedish Krona: Hotter core supports SEK against Euro – ING

ING’s FX Strategist Francesco Pesole highlighted Sweden's modest boost to the Swedish Krona (SEK) due to a slight uptick in the core CPIF excluding energy in July. This figure rose from 0.4% to 0.6%, while the headline inflation slowed as expected from 1.3% to 0.7%. Pesole argues that even after accounting for temporary tax effects, inflation is not strong enough to warrant a market pricing of Riksbank tightening.

This has led to a no-hike view and a year-end EUR/SEK target of 10.80. In core, Sweden's CPIF accelerated surprisingly from 0.4% to 0.6% in July, while the headline figure slightly decelerated from 1.3% to 0.7%. Although markets were already anticipating a possible Riksbank hike by year-end, this modest boost in SEK rates was limited.

Even after adjusting for the temporary tax measures that artificially suppress prices, the inflation outlook does not seem strong enough to justify such a firm market conviction on Riksbank tightening. Pesole acknowledges the rising hawkish risks but maintains the baseline view of no hikes before the end of the year. Consequently, the team continues to see a relatively shallow path for EUR/SEK, aiming for a target of 10.80 by year-end.