GBP/SEK Exchange Rate Firms as Riksbank Unwilling to Commit to December Rate Hike
The Pound Sterling to Swedish Krona (GBP/SEK) exchange rate is edging higher today, in the wake of the Riksbank’s latest rate decision.
At the time of writing the GBP/SEK exchange rate has rebounded roughly 0.2% from its worst levels this morning, leaving the pairing within touching distance of yesterday’s high.
Swedish Krona (SEK) Exchange Rates Slip as Riksbank Non-Committal to December Hike
The Swedish Krona (SEK) finds itself under pressure at the start of this morning’s European session, as market digest the Riksbank’s latest policy guidance.
It came as little surprise to investors to see Sweden’s central bank leave interest rates on hold this month, leaving borrowing rates at a record low of -0.5%.
The Riksbank also stuck to its earlier guidance when discussing the possibility of future hikes, with the bank indicating its first hike in seven years is set for either December or February.
A statement from the bank read:
‘If the economy develops in a way that continues to support the prospects for inflation, the executive board assesses that it will soon be appropriate to start raising the repo rate at a slow pace.’
While SEK traders could ultimately cheer the news, the immediate reaction to today’s decision was one of disappointment.
This comes following some stronger-than-expected domestic inflation numbers in September, which prompted many SEK investors to speculate that the Riksbank would be more willing to commit to a December hike, opening the doors for up to two hikes in 2019.
Johan Lof, economist at Svenska Handelsbanken AB, suggested however that the wording of today’s guidance means there is still ‘a genuine uncertainty in the choice between December or February’, leading to the Krona relinquishing some ground this morning.
Pound Sterling (GBP) Gains Limited as Brexit Headwinds Remain
At the same time while the Pound (GBP) is edging higher this morning, it could struggle to carry its momentum into the second half of the week as ongoing Brexit uncertainty continues to temper demand.
This has not been helped by a report from the National Audit Office this morning which warns that Britain will ‘pay the price’ of a no-deal Brexit due to the UK being unprepared to implement new border controls.
The comments have added to a growing number of Brexit concerns from GBP investors and places even more pressure on Sterling sentiment.
GBP/SEK Exchange Rate Forecast: How Will the Budget Impact Sterling?
Looking forward, barring any major Brexit developments, attention will now likely turn to Chancellor Philip Hammond’s upcoming budget.
This will be the final budget while the UK if still part of the EU and how well the UK economy is prepared for the shock of leaving will be a major focus for investors and could result in some volatility in the Pound Swedish Krona (GBP/SEK) exchange rate.
In the meantime the release of the latest Swedish retail sales figures may prompt some movement in the GBP/SEK pairing later this week, with the Krona potentially weakening at the tail end of the session if sales growth has slowed in September as forecast.