EUR, SEK flows: FX little changed despite weak German, strong Swedish data

Friday opens up with weak German retail sales data and stronger than expected Swedish GDP, although neither have had any immediate impact on currencies. German retail sales are volatile, and the sharp 1.5% m/m decline in July consequently needs to be taken with a pinch of salt. But the data over the last few months does suggests some weakening in the trend, and a big rebound is required in August to prevent this looking like a significant downturn. The account of the latest ECB meeting released yesterday suggested they were very neutral, so it will take more than this to have an impact, but we continue to see some downside risks for the EUR on the crosses.

Contribution to change in GDP, percentage units (latest quarter)

The Swedish GDP data was stronger than expected, rising 0.5% in Q2 against a preliminary estimate of 0.1%. An upward revision had been expected, but only to 0.3%, so the lack of any positive impact on the SEK is a little surprising. It may relate in part to the fact that a lot of the strength in GDP was due to a rise in inventories, offsetting weakness in net exports, while it is also the case that the SEK has outperformed yield spreads against the EUR this year, and already looks a little on the high side. Even so, the data is SEK positive, and for today at least we would favour the EUR/SEK downside.