EUR/SEK gains with focus on ECB policy decision

The EUR/SEK currency pair edged higher on Tuesday, while reversing a loss from the prior trading day, following Swedish GDP data and as focus sets on the outcome of the European Central Bank’s policy meeting on Thursday.

The ECB is largely expected to lower its main refinancing operations rate by 25 basis points to 3.15% at its December policy meeting. And, the ECB deposit facility rate is expected to be reduced to 3.00% from 3.25% currently.

Although inflation is expected to pick up in the short term, it should ease toward the 2% objective next year.

Annual consumer price inflation in the Euro Area rose to 2.3% in November from 2% in October, accelerating for a second straight month.

The acceleration was expected due to base effects, since the steep declines in energy prices from 2023 are no longer factored into the annual rate.

Core CPI inflation, on the other hand, remained steady at 2.7% in November.

ECB policy makers noted wage growth was still elevated, but yet, pressures were easing.

Market players will be closely watching ECB President Christine Lagarde’s press conference for any hints regarding future interest rate trajectory. Investors will be also looking into a new set of ECB economic projections.

Meanwhile, on the macro data front, Sweden’s economy shrank at a monthly pace of 0.4% in October, after a revised down 1.5% contraction in September.

“Economic activity declined in October, held back by weak figures for household consumption expenditure and exports concerning goods, with the latter mirroring weak figures in manufacturing,” Mattias Kain Wyatt, economist at Statistics Sweden, said.

The EUR/SEK currency pair was last edging up 0.18% to trade at 11.5325.