Sweden krona remains crucial

Sweden krona is likely to remain crucial for the Swedish inflation outlook. Hence the Riksbank will continue to prevent any undue SEK strength. The SEK has at most been 3.5% stronger than the Riksbank has expected this year. This occurred in June and was at the time not enough to trigger further easing. 

Admittedly, the vicinity to the Riksbank's July meeting probably helped. Furthermore, the Riksbank should be more tolerant of SEK strength if it occurs due to strong Swedish data, which has been the case recently.

"3.5% could serve as a potential threshold of tolerance for the Riksbank, below which the market will increasingly fear inter-meeting easing. This would put the KIX index at 108.5 when compared with the Riksbank's Q4 estimate (112.4)", says Nordea Bank. 

This is actually in line with the technical outlook of the krona, the KIX index has seen lower and lower lows so far this year. 

"It may be unorthodox to look at the KIX index in technical terms, but this supporting trend-line suggests the KIX index will not dip below 109 until in 2016", added Nordea Bank.