Market Expectations of Bank of England (BoE) Interest Rate Hike Push GBP/SEK Exchange Rate Up
The Pound (GBP) has risen by 0.4% against the Swedish Krona (SEK) today, having been supported by growing hopes about a Bank of England (BoE) interest rate hike on Thursday.
Today’s UK economic data has been less supportive, with July’s manufacturing PMI unexpectedly slowing by more than forecast during the month.
Swedish Krona to Pound (SEK/GBP) Exchange Rate Dips despite Manufacturing Sector Growth
In an unusual turn of events, the Swedish Krona (SEK) has fallen against Pound Sterling (GBP) today despite Swedish manufacturing activity rising in contrast to the UK slowdown.
Swedbank’s manufacturing PMI for July has beaten forecasts, showing growth from 54.2 points to 57.4, which is a 5-month high for the reading.
The Krona’s losses against the Pound today may simply be down to greater demand for Pound Sterling, which effectively negates the positive effect of a higher Swedish manufacturing PMI.
Pound Sterling to Swedish Krona Forecast: Are GBP/SEK Exchange Rate Gains ahead on BoE Interest Rate Hike?
With the week’s initial UK data now out of the way, the next economic event that could affect the GBP/SEK exchange rate will be Thursday’s Bank of England (BoE) interest rate decision.
Taking place at noon, this event could bring a long-awaited BoE interest rate hike from 0.5% to 0.75%.
For context, BoE officials cut interest rates from 0.5% to 0.25% in 2016 and returned them to 0.5% in 2017, so a rate hike now would be the first ‘real’ increase in over a decade.
If the BoE interest rate is raised as forecast then the Pound could appreciate against the Swedish Krona, although a cautious tone among BoE policymakers could limit GBP/SEK gains.
It is also worth noting that an interest rate hike may not occur, in which case the Pound could drop against the Krona on GBP trader disappointment.
Swedish Krona to Pound (SEK/GBP) Exchange Rate Turbulence Forecast on PMI and Production Data
The next sets of economic data which could affect the Swedish Krona will come out on Friday this week and Tuesday next week, respectively covering services activity and industrial production.
Friday’s Swedish services PMI might cause late-week SEK/GBP exchange rate losses, as it is forecast to show a slowdown in activity from 59.8 points to 57.9.
Beyond this, however, the Swedish Krona has a chance to advance against the Pound if next Tuesday’s annual industrial output figure for June rises by 6.9%.
Year-on-year Swedish industrial production levels rose by 3.7% in May so an even greater rise could boost SEK demand and push the Swedish Krona to Pound exchange rate higher.