SEK Update: Encouraging Data Offers Relief Amid Growth Concerns

SEK: Growth picture slightly less grim

Sweden released better-than-expected GDP and retail sales data this morning, which are supporting the krona in early European trading. The Swedish economy contracted by 0.8% in the second quarter, less than the 1.3% consensus and quite a big revision from the preliminary -1.5% figure published last month. Retail sales for July surprisingly grew (by 1.0% month-on-month).

The growth picture clearly remains rather alarming when compared to other major economies, but the krona has already been pricing in a considerable amount of domestic economic underperformance (as well as real-estate-related risks).

There are other important data releases to keep an eye on this week in Sweden: wage figures and the economic tendency survey tomorrow, as well as some manufacturing surveys later in the week. Another potentially big risk event: Riksbank’s member Anna Breman, one of the dovish dissenters at the April meeting, will participate in a panel discussion about inflation tomorrow morning.  

EUR/SEK may face some upward pressure from the euro side if we are right about core inflation data boosting chances of a September ECB hike. Otherwise, some modestly improving external environment and better-than-expected Swedish data can help EUR/SEK trade a bit off from the highs for now.