SEK, NOK, CHF: All about inflation in the coming week

Inflation data in Sweden (Thursday), Norway (Wednesday) and Switzerland (Tuesday) will be of key focus in the coming week. 

In Sweden, after a modest rebound in spot inflation and medium-term inflation expectations in Q1, the trend reversed markedly in April with y/y CPI inflation rates dropping to negative territory once again. 

Despite the hyper-accommodative monetary policy and the general belief that it is having a positive effect on the real economy, Riksbank officials, including Deputy Governor Jansson, have highlighted their willingness and readiness to engage further should May inflation (Thursday) disappoint as well. 

Barclays says they are roughly in line with the market in their expectations for May CPIF (consensus: 0.8% y/y), slightly below Riksbank expectations as per the latest forecasts (0.9% y/y). This makes them think that the risks for the SEK are likely skewed to the downside in the near term should inflation disappoint. 

Equally importantly to the Riksbank's decision making will be the TNS Sifo Prospera report on Swedish inflation expectations (Wednesday), which has recently rebounded somewhat. 

"Looking ahead, we think further accommodative monetary policy is running its course, in the context of solid economic growth, a significantly undervalued currency and increased financial stability considerations, and we expect a modest correction in the SEK" added Barclays.