Pound Swedish Krona Exchange Rate Forecast: Disappointing Swedish Inflation Figures to Fuel Further Riksbank Caution?

GBP/SEK Exchange Rate Surges as Swedish Inflation Misses

The Pound to Swedish Krona (GBP/SEK) exchange rate rose sharply this morning, as investors reacted to Sweden’s latest inflation figures.

At the time of writing GBP/SEK is up by around 0.8%, with the pairing having struck its highest levels since the Brexit referendum.

Swedish Krona’s (SEK) Plummets as Lacklustre Inflation Prompts Riksbank Concerns

The Swedish Krona nosedived against the Pound and the majority of its other peers this morning, as Sweden’s latest CPIF data fell below expectations.

According to data published by Statistics Sweden, inflation rose from 1.7% to 2% in March, just falling short of expectations that it would strike 2.1%.

The disappointing figures prompted fears that policymakers at the Riksbank may begin discussing the possibility of further loosening the central bank’s monetary policy.

Antje Praefcke, analyst at Commerzbank said ahead of the report:

‘If it disappoints the likelihood of Riksbank further adjusting its rate path to the downside will rise despite solid growth.

Just to remind you: the inflation data for January resulted in bitter disappointment and already caused some members of Riksbank’s Executive Board to frown.’

With Sweden’s headline interest rate already at a record low of -0.5%, the possibility of another rate cut from the Riksbank’s has understandably spooked many SEK investors.

Will Carney Speech Bolster Pound (GBP)?

The Pound meanwhile is struggling to find its own momentum this morning as markets await a speech from Bank of England (BoE) Governor, Mark Carney later this evening.

Carney will speak at the Public Policy Forum’s growth summit, in Toronto, Canada later today and investors will be watching closely for any hints regarding the BoE’s policy plans for the coming months.

While the BoE looks on track to deliver a May rate hike, there is considerable speculation over whether it may implement another hike later in the year.

Recent wage growth and inflation figures appear to be supportive of further monetary tightening this year, but a slowdown in other areas of the economy has some analysts questioning whether the BoE will hold back in the second half of 2018.

Analysts at EY Item Clubs said:

‘A largely disappointing set of news on the UK economy which fuels suspicion that GDP growth likely slowed to 0.3% quarter-on-quarter in the first quarter … expectations of another hike in November may well be diluted.’

GBP/SEK Exchange Rate Forecast: Will a Dip in Wage Growth Dent BoE Rate Hike Speculation?

Looking ahead to next week’s session the GBP/SEK exchange rate may find itself sliding lower in the first half of the week following the release of the UK’s latest labour figures.

Economists forecast that Tuesday’s data will show the UK’s unemployment rate ticked up again in February, rising from 4.3% to 4.4%.

However it may be the accompanying wage figures that could prompt losses for the Pound as retreating wage growth may dent hopes that the BoE could implement extra rate hikes in 2018.

Meanwhile a lull in economic data may leave the Swedish Krona a little subdued next week, especially if traders continue to reflect on today’s inflation figures.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail