Shortly before the Riksbank's rate meeting next week, the latest inflation data for July will be published today. They will shed some more light on whether the Riksbank will stick to its dovish stance. After all, in June it held out the possibility of three more rate cuts this year – with four meetings remaining, Commerzbank’s FX analyst Antje Praefcke notes.

Price pressure has eased significantly in recent months

“Now that the wave of risk aversion in the market is over and the krona has recovered somewhat, the Riksbank should be a little less concerned about exchange rate-induced inflationary pressures. In addition, price pressure has eased significantly in recent months, with the headline rate even falling below the inflation target, and the core rate is also on its way to the inflation target, as indicated by the seasonally adjusted monthly rates of change.”

“Although the overall rate is likely to rise again slightly in July from the low 1.3% in June for technical reasons, the core rate (2,3% in June) is likely to move even closer to the inflation target of 2%. The market is confident that the Riksbank will cut next week and even sees the possibility of 50 basis points. It expects 100 basis points by the end of the year, which means that it is even more dovish than the Riksbank itself.”