GBP/SEK Exchange Rate Falls as UK Economy Shrinks on Brexit Uncertainty
Year-on-year UK growth for the second quarter contracted from 0.5% to -0.2% in June causing the Pound Swedish Krona (GBP/SEK) exchange rate to fall to 11.603Kr.
The month-on-month growth figure also fell below the forecast 0% to -0.2% – the worst performance in six and a half years.
Tej Parikh, a Chief Economist at the Institute of Directors (IoD), commented:
‘Contraction in the second quarter is a rude awakening after the growth in the first three months of the year, and confirmation of the concerns businesses have been expressing about the economy.
‘With the nature of the UK’s exit from the EU looking likely to be determined at the eleventh hour, the economy is facing a bumpy ride going into the third quarter.’
The UK’s manufacturing production figures for June also defied estimates for growth of 1.4% by showing a -0.2% decline in output.
Jude Brimble, the National Secretary at GMB, was critical:
‘The [Conservative Party] are steering the economy into the rocks with their chaotic approach to Brexit.’
Fears of an imminent UK recession triggered widespread GBP losses.
SEK/GBP Exchange Rate Edges Higher as Swedish Finance Minister Rules Out Budget Cuts
Meanwhile, the Swedish Krona (SEK) benefited from comments by Sweden’s Finance Minister, Magdalena Andersson, which ruled out the need for budget cuts despite a struggling economy.
Sweden’s public finances remain relatively stable, with debt levels at their lowest since 1977despite the ongoing US/China spat and a contraction of the Swedish economy in the second quarter.
The result has been a buoyant Swedish Krona and renewed optimism in the economy.
Nevertheless, some SEK traders remain cautious after the Swedish Government’s top think tank, NIER, cut growth forecasts from 1.5% to 1.8% earlier this month.
GBP/SEK Outlook: Could Sterling Improve on Positive Unemployment Data for June?
Pound traders will be looking ahead to Tuesday and the publication of the unemployment rate figure for June, which is expected to hold at 3.8%.
Tuesday will also see the release of the UK average earnings figures for June. As these are expected to show an easing in wage growth, we could see the Pound continue to fall against the Swedish Krona.
Meanwhile, SEK traders await Wednesday’s publication of Sweden’s inflation figures for July.
The GBP/SEK exchange rate is likely to remain volatile into next week, with prevailing Brexit uncertainty and a continuing break down in negotiations between the UK and the EU.