GBP/SEK Exchange Rate Falls on ‘Hawkish’ Riksbank Stance
The Pound Swedish Krona (GBP/SEK) exchange rate fell by -0.6% today, with the pairing currently trading around 12.382kr after Sweden’s Riksbank held interest rates at -0.25%.
Sweden’s national bank surprised markets by announcing that it would end negative rates in December, despite a struggling Swedish economy.
David Oxley, an Economist at Capital Economics, said:
‘This comparatively hawkish stance is at odds with the weakness of the domestic economy and a global backdrop where major central banks are cutting rates. On balance, though, it appears that the Bank’s desire to get rates out of negative territory appears to have outweighed any expected boost from a further rate cut.’
The SEK/GBP exchange rate benefited in the short term, despite global economic uncertainty appearing to defy the decision, with Danskse Bank Analyst Michael Grahn even calling the move “incomprehensible”.
However, with the export-oriented Swedish economy reliant on global trade, we could see the Swedish Krona lose some of its gains against the Pound if US-China trade relations sour ahead of the weekend.
GBP/SEK Exchange Rate Falls on Cabinet ‘Rift’ over Brexit
The Pound (GBP) fell against the Swedish Krona (SEK) as the Tory cabinet displayed an increasingly divided stance on the next step for their Brexit campaign. Downing Street is now torn between pushing forward with Prime Minister Boris Johnson’s Withdrawal Agreement Bill or the heightened uncertainty of a pre-Christmas general election.
A Downing Street source said:
‘Any time that parliament gets a vote for delay, it will always choose delay. Therefore, if this parliament is unwilling to vote for a deal, [the Conservative Party] will have to go for a general election.’
The Pound failed to hold ground against an emboldened Swedish Krone as GBP investors sit on their hands ahead of a formal EU27 decision to grant an extension to the October 31st deadline.
In UK ecostats, today’s UK BBA mortgage approvals figure for September eased from 42.527 to 42.310 thousand. However, with Brexit developments still in focus, the data had a negligible effect.
GBP/SEK Outlook: Could Sterling Rise on EU Brexit Extension Announcement?
Brexit developments will continue to drive the GBP/SEK exchange rate into the weekend.
If the British government press ahead with their plans to push Boris Johnson’s current proposal through parliament and the deal finally passes, Sterling will surge as no-deal fears are allayed and GBP investors are given some long-awaited clarity.
However, if the EU grants a Brexit extension or the Conservative Government abandons the deal and instead attempts to force a general election we could see the Pound suffer as short-term uncertainty deepens.
Meanwhile, Swedish Krona traders will be looking ahead to next Monday’s Swedish trade balance figure for September. An improvement could further buoy market confidence in the SEK and signify a stronger-than-expected Swedish economy.