SWEDEN: May CPI Preview: Eurovision and Taylor Swift Add Uncertainty To Services
Swedish May CPI is due at 0700BST. Analysts currently expect CPIF ex-energy at 2.6% Y/Y (vs 2.9% prior). The Riksbank’s March MPR forecasted a 2.9% Y/Y reading, but this projection is now stale with March and April’s forecast error already -0.4pp.
- Unless the data prints markedly below consensus, we don’t think it will have much of a bearing on the Riksbank’s June decision. Executive Board speakers (and the March MPR rate path) indicates that the bar to a second consecutive cut is very high. As such, we think any market reaction is likely to be relatively short-lived.
- Analysts note that lower electricity prices should drag headline CPIF down towards the Riksbank’s 2% target, with analyst consensus at 2.1% Y/Y (vs 2.3% prior, 2.6% Riksbank MPR).
- Services provide a source of uncertainty, particular in leisure-related categories. May saw Sweden host the Eurovision song contest and two Taylor Swift concerts, which may boost restaurant and hotel prices above their seasonal norms.
- See below for a selection of analyst views ahead of the release:
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SWEDEN: April CPI Mini Preview: Importance To Be Determined By Riksbank Minutes
Swedish April CPI is due at 0700BST/0800CET, with analysts expecting a small uptick after March’s surprisingly low print.
- In some ways, the importance of the inflation figure will best be gauged after the release of the Riksbank’s May meeting minutes at 0830BST.
- Following the guidance for 2 further rate cuts in H2 2024 (i.e. making a June rate cut unlikely), it will be interesting to see if any Executive Board members still consider a June cut to be on the table, or whether any members strongly considered holding rates in May.
- In any case, we will still get one more inflation print on June 14 before the June 27 meeting.
- Current Bloomberg consensus sees CPIF ex-energy at 3.0% Y/Y, while the Riksbank expected 3.3% Y/Y in the March MPR.
- An in-line reading would see the Riksbank’s March MPR forecast error reduce to -0.3pp (vs -0.4pp after the March print).
- Analysts generally expect rents to exert upward pressure on inflation in April, alongside food and energy.
- See below for a selection of analyst views from Scandinavian banks:
GILT TECHS: (M4) Bull Flag Formation
- RES 4: 99.19 76.4% of the Mar 12 - Apr 25 bear leg
- RES 3: 99.10 High Apr 10
- RES 2: 98.46 61.8% of the Mar 12 - Apr 25 bear leg
- RES 1: 98.29 High May 10
- PRICE: 97.61 @ Close May 14
- SUP 1: 97.23 Low May 14
- SUP 2: 96.43/95.36 Low May 3 / Low Apr 25 and the bear trigger
- SUP 3: 95.00 Round number support
- SUP 4: 94.86 2.236 proj of the Mar 12 - 15 - 22 price swing
Gilt futures are in consolidation mode and the contract is trading just below its recent high. The latest pause appears to be a bull flag formation. A break of resistance at 98.29, the May 10 high, would confirm the flag and highlight a resumption of the recovery that started Apr 25, and open 98.46, a Fibonacci retracement. On the downside, a stronger reversal lower would refocus attention on 95.36, the Apr 24 low and bear trigger.
EUROZONE T-BILL ISSUANCE: W/C May 13, 2024
Portugal is due to sell bills this week, while Germany, France, Spain and Finland have already come to the market this week. We expect issuance to be E15.5bln in first round operations, down from E30.8bln last week.
- Finally tomorrow, Portugal will look to sell a combined E1.25-1.50bln of the new 6-month Nov 22, 2024 BT and the new 12-month May 16, 2025 BT.
For more on future auctions see the full MNI Eurozone/UK T-bill auction calendar here.
