The Riksbank has put a lot of focus on inflation. Swedish core inflation is running at 0.0%, which is well below the Riksbank's forecast and way below the 2.0% inflation target. However, we now expect a temporary pick-up in Swedish inflation in April. The core measure is expected to rise to 0.5% y/y and the gap to the Riksbank inflation forecast is expected to narrow to 0.2 percentage point.
The inflation numbers might give some temporary support to the SEK, but go long EUR/SEK (or alternatively NOK/SEK) if we see a test of 8.95 in the EUR/SEK this week.
Norges Bank is tapping for the third time in the new 10Y benchmark ahead of the coupons between May 15 to May 25. The Norwegian bonds have not been able to follow German government bonds in the recent rally after the ECB meeting, but the spread widening has been very modest. We expect that the NGBs will catch up after the auction next week given both the coupon money and the attractiveness of the currency after the upbeat rhetoric from Norges Bank last week.
In Denmark, it will also be worth keeping a special eye on inflation. We estimate prices rose 0.1% m/m and 0.7% y/y in April, compared with 0.1% m/m and 0.4% y/y in March. The rise in the annual rate is due chiefly to the base effect of falling prices in April last year.
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