Pound Sterling Swedish Krona (GBP/SEK) Exchange Rate Muted as Brexit Pessimism Sets in
The Pound Sterling Swedish Krona (GBP/SEK) exchange rate remained flat, leaving the pairing trading at around 12.3147kr.
Sterling remained under pressure as markets continued to fear the UK would crash out of the European Union at the end of 2020.
Despite reaching highs after Boris Johnson’s landslide election victory, GBP suffered losses as Brexit pessimism crept back in.
The Pound fell as the Prime Minister’s government which campaigned to ‘get Brexit done’ set the end of 2020 as an immovable deadline.
Officials in Brussels have said the timetable for negotiations is ‘rigid’, which could limit the scope of any trade deal.
Commenting on the increase of Brexit pessimism, Chris Weston, head of research at brokerage, Pepperstone stated:
‘With the level of frothiness in positioning, I think people had priced in very smooth sailing throughout 2020.
‘This has given us a snap back to reality. If you thought Brexit was solved, and we’re going to see very, very smooth times ahead, then that’s not quite going to be the case.’
Swedish Krona (SEK) Flat Ahead of Riksbank Rate Hike
The Swedish Krona sentiment slipped ahead of this week’s Riksbank monetary policy meeting. On Thursday, the bank is expected to raise rates.
With the bank keen to exit negative rates, many believe the hike will be a one-and-done move which means it may not boost SEK as expected.
Weak economic data continues to weigh on the economy, with disappointing PMIs and a deteriorating jobs market.
On Wednesday, Swedish business confidence fell to a lower-than-expected 94 in December while consumer confidence edged slightly higher.
Sterling (GBP) Muted as Inflation Remains Stuck at Three-Year Low
The Office for National Statistics (ONS) revealed UK producer prices remained unchanged at a three-year low in November.
This left the Pound under pressure as inflation remained below the Bank of England’s (BoE) target.
However, with the bank’s interest rate decision coming up soon this means policymakers are likely to leave rates unchanged.
In its previous meeting, the BoE said that inflation will likely fall to 1.25% at the start of 2020, but will be back above the 2% target in around three years.
Commenting on this, KPMG UK’s chief economist, Yael Selfin said:
‘Inflation is expected to remain well below the Bank of England’s target in 2020, thanks to price caps set on regulated utilities and a stronger pound, giving the Bank of England some room to act if the economy wobbles a little next year.
‘The Bank may wish to secure a pre-emptive cut in rates, either in February or May, if recent economic weakness proves more persistent.’
Pound Swedish Krona Outlook: Will a Hawkish Riksbank Buoy SEK?
On Thursday, the Pound (GBP) could slump against the Swedish Krona (SEK) following the Bank of England’s (BoE) monetary policy meeting.
If the bank warns of further uncertainty, and hints that policymakers have considered easing policies, Sterling will fall.
Meanwhile, on Thursday the Swedish Krona could edge higher following Riskbank’s monetary policy meeting.
If Sweden’s central bank raises rates from -0.25% to 0%, it will boost optimism slightly and cause the Pound Swedish Krona (GBP/SEK) exchange rate to slide.