Pound to Swedish Krona Exchange Rate Forecast: Can GBP/SEK Remain Near 10-Month-Highs?

Pound to Swedish Krona Exchange Rate Fluctuates Near Highs despite Brexit Concerns

If not for Brexit concerns weighing heavily on Pound (GBP) trade, the Pound to Swedish Krona (GBP/SEK) exchange rate may have extended its best levels in almost 10 months this week.

After opening the week at the interbank level of 11.40, the Swedish Krona (SEK) was weakened by central bank news, helping GBP/SEK to hit an interbank high of 11.46. This was the pair’s best level since May 2017.

However, as market concerns about the Brexit process have persisted, the Pound to Swedish Krone (GBP/SEK) exchange rate has been unable to hold its highs. The pair trended closer to the week’s opening levels on Friday.

Investors are anxious about the possibility that UK-EU negotiations could fall through, leading to a ‘cliff-edge’ hard Brexit scenario. This is because EU negotiators have indicated that a UK-EU transitional period agreement is not a done deal.

Brexit uncertainties are likely to remain a persistent pressure on the Pound for the time being, with investors anticipating the EU summit later in March when the transition period is likely to be agreed upon.

Swedish Krona (SEK) Exchange Rates Weak Following Riksbank Caution

The Swedish Krona has hit lows against the Pound and other major currencies this week, following a cautious tone taken by the Riksbank.

Sweden’s central bank has continued to take a dovish tone in its monetary policy outlooks due to weak inflation, despite strong economic growth in the nation.

Riksbank Governor Stefan Ingves asserted on Tuesday that the bank would continue to ‘proceed cautiously’ with potential future interest rate hikes.

As a result of the Riksbank’s persistent caution, some analysts have speculated that Swedish interest rates may not rise again at all before the next likely downturn in global inflation.

With Sweden’s interest rates currently negative, this speculation has left investors anxious that the Riksbank may struggle to cope with another global inflation slump in the future.

As a result, Swedish Krona investors continue to largely ignore optimistic Swedish ecostats. Swedish household consumption improved from -0.4% to -0.1% in January, following strong industrial production and services data earlier in the week.

Pound (GBP) Exchange Rates Little Changed Following UK Trade Results

Friday’s UK data had little impact on the Pound to Swedish Krona (GBP/SEK) exchange rate, as Brexit concerns remained in focus and the data was largely uninspiring.

Britain’s January trade deficit update was decent. While the January figure came in at £-3.074bn, the previous figure was revised higher from £-4.896bn to £-2.492bn.

UK production stats fell short of expectations in January however. Manufacturing came in at 0.1% month-on-month and 2.7% year-on-year, missing the respective forecasts of 0.2% and 2.8%.

Similarly, industrial production slipped to 1.3% MoM and 1.6% YoY, rather than the expected 1.5% and 1.8%.

British construction output was also highly disappointing in both Q4 and January stats, but consumer inflation expectations remained steady at 2.9%.

Pound to Swedish Krona (GBP/SEK) Forecast: Inflation Data and Brexit Developments in Focus

The Pound to Swedish Krona (GBP/SEK) exchange rate may be able to return to its best levels in 10 months in the coming week, if Brexit concerns are lightened somewhat.

Investors are hoping for signs that UK and EU negotiators will be able to agree on a post-Brexit transitional period deal.

This would make Sterling more appealing, but further disagreements between the UK and EU would weigh heavily on the Pound and likely keep that multi-month-high out of reach.

Next week’s UK economic calendar will be quiet too, save for the Spring Budget Statement from the UK Treasury on Tuesday.

The Swedish Krona, on the other hand, is likely to be driven by inflation data on Wednesday. If inflation beats expectations in February it could make the Krona more appealing following its poor performance in recent weeks.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard