Pound Swedish Krona (GBP/SEK) Exchange Rate Flat as Bank Warns of ‘Slow Puncture’ to UK Economy
The Pound Sterling Swedish Krona (GBP/SEK) exchange rate was left flat today with the pairing currently trading around 12.0169kr.
The Pound (GBP) was left muted as the Bank of England’s (BoE) Michael Saunders revealed a near-term cut to interest rates may be on the cards.
In the first clear sign of an imminent rate cut, Saunders explained that if the UK avoids a no-deal Brexit and creates further political uncertainty a fiscal intervention may be necessary.
Speaking to local businesses in Barnsley, Saunders stated:
‘If the UK avoids a no-deal Brexit, monetary policy also could go either way and I think it is quite plausible that the next move in Bank Rate would be down rather than up.’
Saunders warned that high levels of uncertainty caused by a delayed Brexit would act as a ‘slow puncture’ to the economy, especially as underlying growth has already slowed to a crawl.
Saunders added:
‘In this case, it might well be appropriate to maintain a highly accommodative monetary policy stance for an extended period and perhaps to loosen policy at some stage, especially if global growth remains disappointing.
‘In general, I would prefer to be nimble, adjusting policy if it appears necessary to keep the economy on track.’
Swedish Krona (SEK) Muted despite an Optimistic Riksbank
Recent Riksbank signals for an end-of-year rate hike have offered the Swedish Krona (SEK) an upswing of support amid increasing concern for the Swedish economy.
The rate hike prediction comes as Friday data revealed Swedish retail sales growth stagnated in August and the previous month’s growth was downwardly revised to 0.3%.
Data from Thursday also revealed households were concerned that a looming slowdown might lead to higher unemployment. As a result, critics called for Riksbank to abandon its plans.
Nordea economist, Torbjorn Isaksson said:
‘The bottom line is that the Riksbank is too optimistic on pretty much everything. The Riksbank has to reconsider its view on the economy and thus its monetary policy stance.’
Pound (GBP) Falls as British Consumer Left ‘Treading Water’
As the 31 October Brexit deadline approaches, GfK revealed September’s British consumers’ confidence index held up better than expected.
The data edged up from August’s six-year low to -12 despite fresh political turmoil.
The survey was carried out in the midst of Prime Minister Boris Johnson’s controversial suspension of British parliament.
Commenting on the data, Joe Staton, client strategy director at GfK said:
‘British consumers appear to be treading water during this wait-and-see run-up to October 31. You can almost sense people are keeping their fingers crossed.’
A separate report revealed that a worryingly low level of Brexit preparedness among small firms had placed additional pressure on Sterling.
The Federation of Small Businesses showed only one fifth of those firms likely to be damaged by a no-deal have taken action to reduce the risks they face.
Pound Swedish Krona Outlook: Will Weak UK Growth Weigh on GBP?
Looking ahead to the start of next week, Sterling could slide against the Swedish Krona if Q2 UK growth data reveals a contraction in the UK economy.