Swedish Krona Pressed by Oil Prices and ECB Stance

The Swedish Krona (SEK) is facing pressure due to high oil prices and the European Central Bank's (ECB) stance, according to Danske Bank. Despite a weak July Gross Domestic Product (GDP) indicator at 2.5% y/y and -0.8% m/m, underlying domestic activity in Sweden appears stronger, with solid services and consumption data.

The Riksbank's June forecast was closer to the actual figure, which may worry doves on the bank's board. However, a weak SEK, high oil prices, and rate spread versus the ECB should not impact the September rate decision.

Danske Bank still expects clear guidance for a hike this year, with November being the likely month for the increase. The combination of rising oil prices and a hawkish ECB has been negative for the SEK, causing EUR/SEK to rise from 11.16 to 11.26.