Pound to Swedish Krona (GBP/SEK) Exchange Rate under Pressure on Riksbank Rate Hike Expectations
Due largely to fresh concerns about how UK trade relations may be impacted by the Brexit process, the Pound Sterling to Swedish Krona (GBP/SEK) exchange rate has been under pressure and fell further on Tuesday.
Thanks to the UK-EU Brexit deal being agreed, GBP/SEK surged from the interbank rate of 11.55 to 11.66 last week. However, it has since shed many of those gains.
On Tuesday, GBP/SEK was trending near its worst levels since last week as Brexit uncertainties deepened.
Investors sold the Pound (GBP) amid concerns that the Brexit deal would not be able to pass through Parliament, and its weakness was compounded by comments about American trade relations from US President Donald Trump.
Meanwhile, the Swedish Krone (SEK) has remained relatively firm amid expectations that the Riksbank will hike Sweden’s interest rates next month – despite Swedish growth concerns.
Pound (GBP) Exchange Rates Soften Following US President Trump’s Comments
Demand for the Pound (GBP) has already been limited this week, as investors turn their attention away from UK-EU negotiations and towards the lack of domestic support from MPs regarding the finally agreed deal.
If there is not enough domestic support for the withdrawal bill to pass through Parliament, concerns will worsen about a worst-case scenario ‘no-deal Brexit’.
Market confidence about Britain’s long-term economic outlook worsened too, as US President Donald Trump appeared to criticise the deal on Monday.
Trump claimed that the deal was ‘good for the EU’ and therefore bad for the UK, and that it may prevent the UK from making independent trade deals. This dampened market hopes for an eventual UK-US trade pact to be made post-Brexit.
While UK officials quickly looked to reassure that Britain would be able to make independent trade deals, analysts noted that the Pound is simply very sensitive towards bad news right now.
Connor Campbell from Spreadex said that Trump’s claim ‘wasn’t what the extra-sensitive Sterling wanted to hear.’
Swedish Krona (SEK) Exchange Rates Firm despite Swedish Growth Uncertainties
The Swedish Krona (SEK) was able to easily climb versus a weakened Pound (GBP) on Tuesday, due to market expectations for a hawkish Riksbank underpinning the Swedish currency’s strength.
The Riksbank, Sweden’s central bank, is widely expected to hike interest rates in December.
Expectations for tighter monetary policy have offered the Swedish Krona some solid ground to trade on, amid other domestic that are weighing on market optimism.
The Swedish Trade Union Confederation, commonly known as LO, noted that broad domestic political uncertainty is likely to continue to limit market optimism. Economists from LO said:
‘The deadlock in the government negotiations means that there’s big uncertainty regarding fiscal policy,
There should therefore currently be a lot of caution regarding rate increases.’
On top of this, economists from Nordea Bank said this week that Sweden’s Q3 growth rate is likely to be well below Riksbank’s forecasts. While this may concern the bank, it is unlikely to influence the chances of the bank’s expected December interest rate hike.
Pound to Swedish Krona (GBP/SEK) Exchange Rate Outlook: Investors Anticipate Swedish Data
While Swedish Krona (SEK) investors are bullish ahead of the expected December interest rate hike from the Riksbank, the Krona’s appeal is still limited by domestic political and economic uncertainties.
As a result, if upcoming notable Swedish ecostats impress investors it could ease some market concerns and leave the Swedish Krona more appealing.
Wednesday will see the publication of Sweden’s November business and consumer confidence stats, as well as October retail sales results.
Thursday’s session will be even more influential for the Krona, as Sweden’s highly anticipated Q3 Gross Domestic Product (GDP) growth rate data will be published.
If the yearly GDP growth rate drops below 2.0% as Nordea Bank economists predict, the Swedish Krona could weaken. However, if growth is better than the projected 0.3% month-on-month and 2.3% year-on-year, the Swedish Krona could push even higher.
As for the Pound (GBP), any notable Brexit developments, such as perceived shifts in support for the Brexit deal in Parliament could influence the Pound to Swedish Krona (GBP/SEK) exchange rate in the coming sessions.