Pound to Swedish Krona (GBP/SEK) Exchange Rate Hits January Worst Following Monday Plunge

Pound to Swedish Krona Exchange Rate Steadies Following Sharp Losses

The Swedish Krona (SEK) struggled to avoid losses last week, which made it easier for the Pound Sterling to Swedish Krona (GBP/SEK) exchange rate to sustain significant gains. However, the Krona finally found its feet yesterday and knocked the pair lower again.

Last week saw GBP/SEK open at the interbank level of 12.29 and put in major gains, before closing the week in the region of 12.41.

Despite those significant gains, GBP/SEK had quickly shed them all by the time of writing on Tuesday morning. GBP/SEK currently trends just above a January low of 12.26.

Yesterday’s plummet was due to Bank of England (BoE) interest rate cut bets, suddenly clouding over the Pound (GBP) outlook. Meanwhile, the Swedish Krona finally benefitted from the recent market rise in trade sentiment.

Pound (GBP) Exchange Rates Remain Under Pressure Following Monday Plunge

At the beginning of the week, the Pound (GBP) suffered significant losses against many major currencies. This was due to a fresh rise in bets that the Bank of England (BoE) could cut UK interest rates as soon as this month.

Over the weekend multiple BoE policymakers indicated that would be willing to vote to cut interest rates soon, if domestic data didn’t show stronger signs of recovery.

Rather than show signs of recovery though, yesterday’s slew of UK ecostats generally fell short. They indicated that Britain’s economy performed even worse than expected towards the end of 2019.

This only deepened BoE interest rate cut bets. Markets are now pricing in around a 50% chance of a rate cut at the end of January.

According to analysts from ING, the Pound’s outlook is cloudy in general amid BoE speculation and Brexit uncertainty for the coming months:

‘Bar a possible rate cut, the uncertainty about the EU-UK trade deal should also limit GBP upside throughout 1H20.’

Swedish Krona (SEK) Exchange Rates Finally Benefit from Trade Sentiment

Market optimism around risk and trade sentiment has been gradually building over the past week. US-Iran military tensions appeared to cool, and US-China trade relations seem more positive for now.

The Swedish Krona (SEK) is a currency that is often correlated to trade sentiment, and would typically benefit from this news.

However, due to some disappointing Swedish retail data and some lingering dovishness from Riksbank policymakers, the Swedish Krona was unable to benefit from the risk-on movement throughout last week.

When markets opened yesterday however, the Swedish Krona experienced a strong rebound from the lows it saw last week. It was able to capitalise on the Pound’s selloff as a result.

Today’s weaker than expected Swedish household consumption data made it more difficult for SEK to hold all its gains, but GBP/SEK still remains fairly near January lows at the time of writing.

Pound to Swedish Krona (GBP/SEK) Exchange Rate Awaits Inflation Results

Focus on central bank speculation is likely to continue driving Pound to Swedish Krona (GBP/SEK) exchange rate movement in the coming sessions, with key data due for publication.

Wednesday’s data in particular could influence both Bank of England (BoE) and Riksbank speculation if it surprises investors. Swedish inflation rate stats from December will be published, followed by UK inflation.

Poor Swedish inflation could worsen concerns that Riksbank’s recent interest rate hike was hasty, and could put further pressure on the Swedish Krona (SEK).

Meanwhile, poor UK inflation data could worsen concerns that Britain’s economic outlook is weakening, which would make a January interest rate cut from the BoE more likely.

The week will be rounded off on Friday by UK retail sales results. Any surprising developments in Brexit or global trade could also influence the Pound to Swedish Krona (GBP/SEK) exchange rate.

Josh Jeffery

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