SEK flows: Little reaction to GBP, Riksbank awaited

Swedish Q4 GDP has come in marginally below expectations at 0.2% q/q, but the 0.7% gain in December following the 1.3% gain in November makes the picture for Q1 look constructive, starting from a high base relative to Q4. EUR/SEK is not much changed in response, and continues to look close to fair based on the normal yield spread correlation. The Riksbank meeting later could disturb this, but anything other than a 25bp cut would be a major surprise, so the market reaction will likely depend on Riksbank guidance, which we also doubt will be too far away from current market pricing. However, the Riksbank is currently priced to stop their easing cycle somewhat earlier than the ECB, partly because they have already reached lower levels of rates due to more aggressive easing in the past. This may allow SEK yields to edge higher relative to EUR yields and suggest scope for EUR/SEK declines going forward.