Key moments

• EUR/SEK trades just above lows last seen on December 15th 2022
• Sweden CPI inflation accelerates more than expected – preliminary data
• ECB expected to cut key policy rates, focus on rate guidance

The EUR/SEK currency pair hovered just above a fresh 27-month low of 10.9270 on Thursday, as the Trump administration’s decision to grant a one-month tariff reprieve on automobile imports from Mexico and Canada underpinned risk sentiment.

“The krona is reaping most of the benefit from the market’s positive sentiment on European risk assets,” ING Forex strategist Francesco Pesole wrote in an investor note.

Optimism regarding a Ukraine peace deal and an improvement in Sweden’s macro outlook have also supported the SEK rally since early February.

Sweden CPI inflation accelerates in February

The latest macro data out of Sweden revealed that annual consumer inflation had picked up at a faster pace than expected in February. The inflation rate rose to 1.3% from 0.9% in January, versus market consensus of 1.1%.

Meanwhile, Sweden’s consumer price index with a fixed interest rate (CPIF), Riksbank’s target variable for inflation, went up to 2.9% year-on-year in February, marking the sharpest increase since January 2024. It also exceeded market estimates of 2.7% YoY.

The flash data may challenge the view there could be room for two more interest rate cuts by the Riksbank this year.

ECB policy decision and press conference up next

Market focus now sets on the outcome of the European Central Bank’s policy meeting later on Thursday.

The ECB is largely expected to lower its main refinancing operations rate by 25 basis points to 2.65% at its March policy meeting. And, the ECB deposit facility rate is expected to be reduced to 2.50% from 2.75% currently.

The minutes of the ECB’s January meeting showed the Governing Council had agreed monetary policy was still restrictive and it was too early to discuss a potential conclusion of the bank’s easing cycle.

Yet, there was a consensus among policy makers that the disinflation process was on track and growth risks were on the downside.

Market players will be closely watching ECB President Christine Lagarde’s press conference for any hints regarding future interest rate path as well as the ECB’s set of macroeconomic projections.

The EUR/SEK currency pair was last edging down 0.40% to trade at 10.9407. During early European session, the exotic Forex pair registered an intraday low of 10.9270, or a level not seen since mid-December 2022.