Pound Sterling to Swedish Krona (GBP/SEK) Exchange Rate Rebounds despite UK No-Confidence Challenge

Pound to Swedish Krona (GBP/SEK) Exchange Rate Steadies as Investors Await UK Confidence Vote

Despite UK political uncertainties worsening further overnight, the Pound Sterling to Swedish Krona (GBP/SEK) exchange rate rebounded and steadied slightly on Wednesday morning. Investors are hesitant to make any major moves on Sterling (GBP) until the result of an upcoming confidence vote in the Prime Minister.

Since opening this week, GBP/SEK has plummeted as UK political and Brexit uncertainties worsen. GBP/SEK briefly touched a nine-month low of 11.33Kr before rebounding slightly at the time of writing.

Following news that the UK government had delayed a key parliamentary vote on Brexit, perceived confidence in Prime Minister Theresa May worsened among both her opposition and allied parties.

However, when a vote of no-confidence was finally confirmed on Wednesday morning, the Pound (GBP) actually recovered slightly.

Sterling was able to more easily climb against the Swedish Krona (SEK), which has been unappealing amid underwhelming Swedish inflation stats.

Pound (GBP) Exchange Rates Rebound on UK No-Confidence Vote

Overnight, MPs from Theresa May’s Conservative Party triggered a vote of no-confidence in the leader, causing further uncertainty in UK politics on top of the recent surge in Brexit angst.

As Sir Graham Brady, Chair of the 1922 Committee, received at least 48 letters of no-confidence from Conservative MPs, a vote will be held this evening between 6pm and 8pm UK time.

Sterling (GBP) advanced after the no-confidence vote was announced, as investors anticipated the result of the vote would have the chance to drive Sterling either much higher or much lower.

Analysts generally expect the no-confidence vote will end with May successfully maintaining power. Valentin Marinov, Head of G10 Currency Strategist at Credit Agricole, explained the Pound’s recovery:

‘I suspect that some of that was expected especially given the sharp drop in the Pound we had yesterday,

While the risk of ousting PM May has clearly increased, I don’t think that there is a credible candidate to replace the PM and who can make the no confidence vote successful.’

On the other hand, other analysts have said that if May is defeated in a vote it would increase the chances of Article 50 and the Brexit process being delayed.

Swedish Krona (SEK) Exchange Rates Volatile on Political and Monetary Policy Uncertainties

The Pound (GBP) was able to more easily recover against the Swedish Krona (SEK), thanks to mixed Swedish data and ongoing Swedish political uncertainties weighing on the currency.

This week’s Swedish data has been generally unsurprising so far, but has continued to indicate that the inflation outlook is mixed.

Sweden’s November Consumer Price Index (CPI) inflation rate figures were published this morning and met market expectations.

The monthly figure remained at -0.1% as forecast, while the inflation rate slowed from 2.3% to 2.0%, also as expected.

Despite this, and as well as some comments from Riksbank Deputy Governor Per Jansson expressing concern at weak inflation figures, some analysts still expect the Riksbank will hike interest rates this month.

However, the uncertainty surrounding this, coupled with ongoing political deadlock as Sweden’s Parliament continues to attempt to form a government, have left the Swedish Krona volatile.

Pound to Swedish Krona (GBP/SEK) Exchange Rate Investors Await Result of No Confidence Vote

It’s unlikely that Pound to Swedish Krona (GBP/SEK) exchange rate volatility will let up any time soon, but the pair is still likely to see a strong reaction to the outcome of this evening’s UK no-confidence vote.

If UK Prime Minister Theresa May holds onto her leadership with a comfortable majority, the Pound (GBP) may recover as investor confidence in her government’s stability gets a boost.

However, if she wins with less support than expected, or is even defeated, the Pound may tumble further.

With the Brexit process itself in the balance, the Pound will remain sensitive to any other UK political or Brexit developments in the coming days. There is still concern that other parties may also attempt to contest no-confidence against the government.

Tomorrow will see the publication of Sweden’s November unemployment rate, but Swedish Krona (SEK) investors are more likely to focus on this month’s upcoming Riksbank policy decision.

Ultimately, volatility in UK politics is most likely to drive the Pound to Swedish Krona (GBP/SEK) exchange rate this week.

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