Rising Hopes for UK Interest Rate Hike Push GBP/SEK Exchange Rate Upwards
The Pound to Swedish Krona (GBP/SEK) exchange rate saw a small rise today, remaining close to the best rate since December 2017.
Sterling traders are riding a wave of optimism over the prospects for the UK economy at present, with slowing inflation failing to dampen positive sentiment over decent wage growth and employment. Many Pound traders believe that these conditions could raise the odds of one or more Bank of England (BoE) interest rate hikes in 2018.
The Pound to Swedish Krona appreciation has come despite a cautious response to the latest earnings and employment data. Such sentiment was echoed in remarks by Senior ONS Statistician David Freeman: ‘Demand for workers clearly remains strong. Nevertheless, inflation remains higher than pay growth and so the real value of earnings continues to decline.’
UK Distributive Trades Drop in January, Unsettling GBP/SEK Exchange Rate
Another factor preventing an outright Pound to Swedish Krona rally today has been the release of Confederation of British Industry (CBI) retail sales stats.
These showed slowing sales growth in January, and represent the weakest recorded figures in over four years.
Also highlighting the problem of a continuing UK wage squeeze, CBI Head of Economic Intelligence Anna Leach said:
‘Household spending will remain under pressure this year from higher inflation and low wage growth, which will continue to weigh on sales growth in the retail sector.’
Lower Confidence and Higher Unemployment Leave SEK/GBP Exchange Rate Down
Recent Swedish economic data has proven disappointing, with the Krona being dragged down by falling confidence and rising unemployment.
Business confidence and consumer confidence dropped in January, with consumer sentiment dropping below predicted levels.
An additional factor weighing on the SEK has been national unemployment, which rose from 5.8% in November to 6% in December. While forecasts had been for a rise to 6.1%, this smaller-than-expected outcome offers little cheer.
Unemployment in Sweden had dropped from 6.3% in October to 5.8% in November last year, so the recent reversal has been seen as doubly negative.
Pound to Swedish Krona Exchange Rate Forecast: Sterling Volatility Possible on GDP
The Pound could lose ground to the Swedish Krona on Friday if UK GDP growth is revised down for Q4 2017.
The year-on-year reading is predicted to be downgraded from 1.7% to 1.4%, which could lower confidence in the UK economy and devalue the Pound.
On the other side of the equation, the Krona could fluctuate against Sterling if tomorrow’s Swedish retail sales figures show falling activity in December.
Estimates are for rising year-on-year sales but a month-on-month drop to -0.5%, so Krona traders could steer clear of the SEK until a clearer picture emerges.