SEK, NOK flows: SEK resilient to weak CPI, but...

Swedish August CPI has come in on the weak side of expectations at 1.9% headline and 1.2% core against the 2.1% and 1.3% consensus forecast. But EUR/SEK has nevertheless edged lower after the data, dipping a figure to 11.43. This looks strange, and the truer reaction may be in NOK/SEK, which has rallied 15 pips to 0.9580 this morning. NOK/SEK continues to look very much out of line with the historic yield spread correlation, with the SEK on the high side, and while EUR/SEK also looks low relative to spreads, the picture is a little less clear. NOK/SEK may have substantial upside scope from here, but the NOK has been underperforming for most of the year, so there can be little confidence in a NOK recovery until there is a clearer technical signal. Even so, it is hard to see the case for a break below 0.95 which has proved strong support in the last couple of years. EUR/SEK should also find support in the 11.40 area.