SWEDEN: Unsurprising Drivers In May Inflaiton Report; Momentum Still Eases
Swedish May CPIF ex-energy confirmed flash estimates at 2.47% Y/Y (vs 3.10% prior), below the Riksbank’s 2.68% March MPR projection. Headline CPIF also confirmed the flash at 2.26% Y/Y (vs 2.30% prior), in line with the Riksbank’s projection. MNI’s estimate of seasonally adjusted underlying inflation indicates benign price pressures in May, rising 0.02% M/M (vs 0.35% in April). That pulls 3m/3m momentum down to 3.04% (vs 3.90% prior). Although details of the report suggest one-off (and expected) factors pulled down inflation in May, the Riksbank’s view that the Q1 uptick in inflationary pressures was temporary is being affirmed. This could support a 25bp cut next Wednesday.
- As expected, the increased subsidy rate for the tax deduction on own home repairs pulled down CPIF ex-energy by two tenths in May, implying a -2.57% M/M and -11.52% Y/Y (vs 9.06% prior) rate.
- Within other major services sub-categories, rents eased to 4.92% Y/Y (vs 5.09% prior), while transport services were pulled down by lower airfares (-11.27% Y/Y vs 24.28% prior). The latter effect was also seen in Norway, as Easter-effects unwound. Recreation and culture eased to 0.79% Y/Y (vs 1.24% prior), helped by lower package holidays. Offsetting these effects were higher accommodation prices (1.57% Y/Y vs -0.4% prior).
- Core goods inflation likely accelerated a little relative to April, with clothing and footwear at 1.66% Y/Y (vs 1.54% prior) and furniture and household equipement at -0.58% Y/Y (vs -1.24% prior).
- Food inflation eased to 4.09% Y/Y (vs 4.49% prior), with the monthly rate of 0.13% M/M below the 2010-2019 average.
- The pullback in underlying inflation was offset by a rise in electricity inflation on a base effect. Electricity and fuels inflation was 8.55% Y/Y (vs -4.42% prior).
- The proportion of subcomponnets with annual inflation rates between 1-3% ticked up to 20% from 17% prior.
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GOLD TECHS: Key Support Remains Exposed
- RES 4: $3578.0 - 2.000 proj of the Dec 19 - Feb 24 - Feb 28 swing
- RES 3: $3547.9 - 1.764 proj of the Feb 28 - Apr 3 - Apr 7 price swing
- RES 2: $3435.6/3500.1 - High May 7 / High Apr 22 and bull trigger
- RES 1: $3347.5 - High May 9
- PRICE: $3231.5 @ 07:31 BST May 14
- SUP 1: $3202.0 - Low May 1 and a key support
- SUP 2: $3164.5/64.3 - 50-day EMA / 61.8% of Apr 7 - Apr 22 upleg
- SUP 3: $3100.0 - Round number support
- SUP 4: $3071.5 - Low Apr 10
The latest pullback in Gold still appears corrective. Key short-term support to watch is $3202.0, the May 1 low. A clear break of this level would undermine the short-term bullish theme and signal scope for a deeper retracement. This would open $3164.3, 61.8% of the Apr 7 - Apr 22 upleg. Note that the 50-day EMA is at $3164.5 - a key support too. The M/T trend remains bullish, a reversal would refocus attention on $3500.1, the Apr 22 high and bull trigger.
SWEDEN: Final April CPIF Confirms Flash; Feels Supportive Of Dovish RB Guidance
Swedish April CPIF ex-energy confirmed flash estimates at 3.10% unrounded, still up from 2.97% in March but slightly below the Riksbank’s 3.15% projection from the March MPR. Overall, the details of the report feel supportive of the Riksbank’s dovish guidance tilt at the May decision.
- As expected, the timing of Easter pushed up volatile travel-sensitive services items such as international flights (24.28% Y/Y vs -10.62% prior) and package holidays (11.22% Y/Y vs -1.61% prior).
- Meanwhile, there were more encouraging developments in other services categories:
- Rents eased to 5.09% Y/Y (vs 5.23% prior).
- Medical services fell to 3.07% Y/Y (vs 3.95% prior).
- Recreation and culture services softened to 3.32% Y/Y (vs 3.98% prior).
- Catering services fell to 3.84% Y/Y (vs 4.07% prior).
- Elsewhere, insurance remained firm at 5.65% Y/Y (vs 5.53% prior), while financial services saw an annual price reset to 4.19% Y/Y (vs 0.0% prior).
- Food inflation softened from March’s 15 month high of 4.74% Y/Y to 4.49% in April, even as coffee inflation spiked to 42.19% Y/Y (vs 29.99% prior).
- Core goods saw offsetting contributions from clothing and footwear (1.54% Y/Y vs 1.37% prior) and furnishings and household equipment (-1.24% Y/Y (vs 0.53% prior).
- Headline CPIF was 2.30% Y/Y (vs 2.34% prior), in line with the Riksbank’s 2.29% projection. Electricity and fuel inflation fell to 04.42% Y/Y (vs -2.66% prior).
POLITICAL RISK: German/EU Target Russian Energy, Shipping, Banking via Sanctions
The German government and European Union target the Russian energy, shipping, and banking sectors with further sanctions given Russia does not accept their demand of a ceasefire in the Ukraine conflict, according to a Bild report:
- "In the shipping sector, ship insurance for shipping companies and ships in the so-called shadow fleet, through which Russia illegally ships oil in violation of the sanctions, are to be targeted in particular."
- "In the banking sector, new punitive measures for individual banks that are active in Russia or involved in circumventing sanctions are being discussed. Russia is also being discussed for at least a temporary decoupling from the SWIFT payment system."
- "In the energy sector, gas imports from Russia are to be reduced to zero. At present, just under 20 percent of natural gas in the EU still comes from Russia."
Substantive sanctions against Russian banking, shipping and industry have been in place from the onset of the invasion into Ukraine, and measures including a clean severance from SWIFT have been proposed for several years - but may face internal resistance from the likes of Hungary and Slovakia, who maintain longer-term gas supply contracts with Moscow.
