SWEDEN: Flash June Inflation In Focus With August Cut In The Balance
Swedish June flash inflation is due on Monday (0700BST/0800CET). Although no details are provided in the flash release, markets will still be sensitive to the CPIF ex-energy reading given an August Riksbank cut remains in the balance. A string of weak growth data since the Riksbank’s dovish June 18 decision has weighed on the SEK, with EURSEK now trading above its 200DMA for the first time since February. Initial resistance, which will be in focus if inflation prints on the soft side, is 11.3203 (76.4% retracement of the March – April selloff).
- The Riksbank projected CPIF-ex energy at 2.86% Y/Y in the June MPR (vs 2.47% prior). Analysts on balance see slight upside risks to this projection, with the median forecast at 3.0% Y/Y.
- The acceleration in underlying inflation compared to May is not expected to be a “concerning” one though: Higher prices on volatile airfares and package holidays (the latter of which has a much larger weight in the basket compared to 2024) are seen as the main drivers, alongside an unwind of temporary services softness in May.
- Unfortunately, the lack of detail in the flash won’t allow for any inspection of the underlying drivers until the final release on June 14th.
- Elsewhere, there is an expectations that core goods will be pulled lower by the start of summer sales, with the strong SEK also set to weigh on imported goods inflation.
- The acceleration of food inflation was a worry earlier this year, but leading indicators (e.g. PPI, business price plans) have rolled over in recent months.
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EUROPEAN FISCAL: EU Opens EDP Against Austria
The EU has recommended opening an excessive deficit procedure against Austria. This isn't too surprising a development. Last month's press conference from finance minister Marterbauer detailed Austria's targets for a budget gap of 4.5% and 4.2% of GDP in 2025/26 and plans to reach the EU's 3% of GDP budget gap target only in 2028 - marking a sizeable deterioration from 2025 deficit estimates in the range of 3.3-3.8% GDP as recently as Apr 3rd.
Some highlights from the EU release:
- "The Commission Spring 2025 Forecast projects a general government deficit of 4.4% of GDP in 2025 and 4.2% in 2026. Government investment is projected to remain at 3.9% of GDP in 2025 and to increase to 4.0% in 2026. Based on the Commission’s estimates, the fiscal stance is projected to be contractionary, by 1.3% of GDP, in 2025. The growth in nationally financed primary current expenditure in 2025 is projected to provide a contractionary contribution to the fiscal stance, amounting to 0.9% of GDP".
- "Overall, the debt sustainability analysis indicates high risks over the medium term. The baseline debt trajectory is sensitive to macroeconomic shocks. According to the stochastic projections, which simulate a large range of possible temporary shocks to macroeconomic variables, there is a high likelihood that the debt ratio in 2029 will be higher than in 2024".
EU: Trade Comm Told USTR 50% Steel Tariff "Does Not Help Negotiations"
EU Trade Commissioner Maros Sefcovic speaking at a press briefing at the OECD trade ministerial in Paris. Says that the main message at the talks "is strong support for multi-lateral ties [and a] strong rules-based system." In a similar line to that taken earlier, Sefcovic says that he had a "substantive and constructive discussion" with USTR Jamieson Greer, and that these talks will continue. On the escalation in US steel tariffs to 50% (calls it a "surprise"), Sefcovic he said he discussed the matter with Greer and that he "told him we strongly regret it, and it does not help negotiations." Says talks with the US "are covering all the issues". Sefcovic: "We clearly have the same challenges as the US on steel, which is global overcapacity."
- Sefcovic: "I still believe in negotiations with the US [and] believe we can achieve a positive result, but [we] are ready to defend our interests." Says that discussions on EU countermeasures are ongoing, "We are following a rules-based procedure".
- On other nations:
- China: Sefcovic says he had a "focused" meeting with Chinese Commerce Minister Wang Wentao. Says "we are working hard to address issues and prepare for the July EU-China summit."
- India: Says that talks focused on agriculture will allow the trade negotiation process to advance further.
- Australia: Sefcovic says there has been "re-engagement in our free trade agreement negotiations" and he "believes we can achieve substantial progress this year."
PIPELINE: Corporate Bond Roundup: RBC, BC, Macquarie Bond Issuance on Tap
- Date $MM Issuer (Priced *, Launch #)
- 06/04 $Benchmark RBC 60NC5 7.125%a
- 06/04 $Benchmark British Colombia 10Y SOFR+95
- 06/04 $Benchmark Macquarie 3Y +75a, 3Y SOFR
- 06/04 $Benchmark IDA 5Y SOFR+46
- $16.2B Priced Tuesday
