Pound Swedish Krona (GBP/SEK) Exchange Rate Rises as Swedish GDP Casts Doubt on Riksbank Rate Hike
Despite broad GBP losses elsewhere, the Pound Sterling Swedish Krona (GBP/SEK) exchange rate edged up today and the pairing is currently trading at an inter-bank rate of 11.6219Kr.
Sterling was left under pressure as Brexit pessimism increased, however disappointing data from Sweden allowed the pairing to rise.
On Tuesday morning data revealed that the Swedish economy unexpectedly shrank during the second quarter of 2019.
GDP fell by -0.1% in the second quarter which has cast further doubts on plans for Riksbank to continue raising interest rates.
The Swedish central bank had stated it expects to raise rates towards the end of 2019 or the start of 2020.
However, a rate hike seems unlikely and commenting on this, Swedbank noted:
‘Today’s data suggests that the strength in the Swedish economy is dampening which is negative news for the Riksbank.
‘This adds some downside risk to our forecast of a rate hike in December.’
Sterling (GBP) Rises despite Losing Around 2.4% of its Value
Meanwhile, Brexit pessimism and the threat of a no-deal Brexit dampened sentiment in Sterling at the start of this week.
Growing Brexit pessimism initially caused GBP/SEK to hit its lowest level since January earlier this morning.
The Pound has also been left under pressure as there is a chance new Prime Minister Boris Johnson will call an early election.
The government has toughened its stance on a no-deal, which Michael Gove noted was ‘now a very real prospect’.
Added to this, reports revealed that since Johnson became PM the UK currency has lost around 2.4% of its value thanks to this hard-line stance.
Boris Johnson: ‘We are Not Aiming for a No-Deal Brexit’
Meanwhile, on Monday Johnson’s official spokeswoman said that while the PM had made it clear he wishes to strike a deal with the EU, there is no point re-opening talks unless the EU agreed to renegotiate the deal.
However, it seems unlikely Johnson will be able to push through a last minute deal.
Speaking during his visit to the Trident nuclear base on Monday, Boris Johnson stated:
‘We are not aiming for a no-deal Brexit at all. What we want is to get a deal and I’ve had some interesting conversations with our European partners.
‘The feeling is, yes there’s no change in their position, but it’s very, very positive.
‘They all know where we are: we can’t accept the backstop, it was thrown out three times, the withdrawal agreement as it stands is dead and everybody gets that. But there is ample scope to do a new deal and a better deal.’
Pound Swedish Krona (GBP/SEK) Exchange Rate Outlook: Will a Dovish BoE Weigh on GBP?
Looking ahead to Thursday, the Swedish Krona (SEK) could slide against the Pound (GBP) following the release of the Swedish manufacturing PMI.
If July’s PMI reveals even weaker than expected growth in July, it could weigh on the Krona.
However, Sterling sentiment could slide again following the Bank of England’s (BoE) interest rate decision and meeting minutes.
While it is expected the bank will leave rates unchanged, if the minutes highlight the danger of the very real prospect of a no-deal Brexit, the Pound Swedish Krona (GBP/SEK) exchange rate will slide.