SEK flows: EUR/SEK reverses initial dip after stronger CPI

Swedish April CPI has come in somewhat above market consensus, at 3.7% y/y headline and 2.3% y/y core. While EUR/SEK initially fell back on the news, it has quickly reversed those declines and is now higher on the day. EUR/SEK has been soft through the last couple of weeks, significantly outperforming the yield spread correlation, helped by the negative EUR sentiment that emerged after the European elections and the announcement of the French parliamentary elections at the weekend. So some correction was due and the firmer CPI provides a profit-taking opportunity. SEK still looks to be on the strong side against the EUR and particularly the NOK. While EUR/SEK may well hold at lower levels given Eurozone political concerns, the case for NOK/SEK to hold below parity looks much weaker.