Yesterday's inflation surprise in Sweden dragged the EUR/SEK pair down. Nonetheless, economists at ING believe that a sustainable move below 11.00 still looks premature.

Activity data and outcome of wage negotiations can still generate significant SEK volatility

“Yesterday’s core CPIF inflation print came in hotter than expected at 8.7%, and EUR/SEK dropped on expectations of more Riksbank tightening. While this fits our view for a recovery in the Krona over the course of the year, we warn against celebrating too early. Remember that the slump in SEK was originally triggered by concerns about the Swedish economic and housing situation, and while more Riksbank tightening helps SEK in the near term, it raises the risks of a black-swan scenario materialising down the road.”

“We think activity data and the outcome of wage negotiations can still generate significant volatility in the Krona, and a sustainable move below 11.00 in EUR/SEK still looks premature.”