The week ahead in Sweden contains two very interesting outcomes: (1) Household consumption indicator for October (Wednesday, at 09.30 CET), which should post a pronounced rise on the back of strong retail sales, and (2) November Inflation data (Thursday, at 09.30 CET).
We expect inflation to continue to rise but there are some risks to the downside from a recently (temporarily?) stronger exchange rate. Our estimates for November are 0.1 percentage points below the Riksbank's for CPI, CPIF and CPIF excluding energy.
We have revised our Riksbank forecast after the less aggressive ECB outcome last week and now look for a rate cut April next year (previously December this year).
In Norway we expect Monday's industrial production data to show an increase of 0.2% m/m in October, which could mean that the worst of the headwinds are behind us.
On Thursday we get inflation numbers for November, where we expect the annual rate of core inflation to be unchanged at 3.0%. The rise in inflation has been driven entirely by higher import prices on the back of the weaker krone. There is therefore every reason to believe that the current high level of inflation is only temporary, a view shared by Norges Bank. There will therefore be less market interest than usual.
The combination of a better than feared Regional Survey and the less aggressive ECB has given support to our long-held view that Norges Bank will not cut rates in December.
The decision by Danmarks Nationalbank to leave the deposit rate unchanged after the ECB rate cut could once again lead to a discussion whether an independent Danish rate hike could be in the cards over the next couple of months. We don't think so. The DKK-EUR policy rate spread has now been narrowed 10bp to -0.45%, the effective money market spread (Cita vs Eonia) is smaller than this, the outflow has clearly slowed the last couple of months and finally Denmark still runs a significant current account surplus. Hence, we estimate that Denmark will have a below ECB deposit rate for the foreseeable future.
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