Pound Sterling Swedish Krona (GBP/SEK) Exchange Rate Muted as Riksbank Ready to Act
The Pound Sterling Swedish Krona (GBP/SEK) exchange rate remained flat, trading at around 12.6525Kr.
The Swedish Krona remained flat on Friday after minutes from Riksbank revealed policymakers were in no hurry to raise interest rates.
After lifting rates to 0% in December, last month’s minutes show the bank does not expect to make any moves in monetary policy over the coming years.
The minutes showed Governor Stefan Ingves said:
‘I see no hurry to raise the repo rate. The inflation rate can overshoot the target for a period of time, especially given that inflation has historically more often been under than over the target.’
Policymakers also remained cautious about pushing rates too far into negative territory again, and Deputy Governor Anna Breman said:
‘To cut the repo rate below zero again is possible – it is important that zero is not regarded as a lower bound. However, there is a functional lower limit as to how negative the repo rate can be before the transmission mechanism deteriorates.’
However, the Riksbank is ready to act if US-China trade tensions heighten once again or the economic impact of Covid-19 is larger than expected.
Covid-19 Fears Send Investors to Safe Haven Currencies
The Swedish Krona received a slight boost on Friday as investors fretted about the spread of Covid-19, sending traders towards safe haven currencies.
China reported an increase in the number of infections as the virus has already claimed the lives of more than 2,200 people.
Commenting on this, global head of FX at HSBC, David Bloom said:
‘New cases in [South] Korea and in Japan, [have] obviously given some people a little bit of cold feet regarding Japan and the Yen as a safe haven.
‘They’re thinking: ‘Maybe Swissy and gold are better’. So there is a little bit of scratching of heads, there’s no doubt about it.’
Sterling (GBP) Flat as British Economy ‘No Longer Flat on its Back’
The Pound remained flat today, after flash PMI data showed the country saw the fastest manufacturing output growth since April 2019.
Added to this, private sector output was able to see the joint-fastest expansion since September 2018.
Sterling remained muted against SEK as Markit showed supply chain disruptions began to emerge. Some service providers reported cancellations of some orders from clients in Asia due to the outbreak of Covid-19.
Service providers were more optimistic about outlook compared to manufacturing companies. Although, there has been little change in optimism levels since the start of 2020.
Commenting on this morning’s data, Tim Moore, Associate Director at Markit noted:
‘UK private sector growth held its ground in February as a stronger contribution from manufacturing output helped to keep overall business activity on a stronger path than any time since September 2018. The latest survey also revealed a solid upturn in the service economy, driven by improving domestic spending and a recovery in new business enquiries since the start of 2020.
‘The recent return to growth signalled by the manufacturing and services PMIs provides a clear indication that the UK economy is no longer flat on its back, with our GDP nowcast pointing to 0.2% growth through the first quarter of the year.’
Pound Swedish Krona Outlook: Swedish PPI, Confidence and Retail Sales in Focus
Looking ahead to next week, the Swedish Krona (SEK) could slide against the Pound (GBP) on Thursday following a slew of Swedish data.
If February’s Swedish business and consumer confidence both slump further than expected, SEK will fall.
Meanwhile, disappointing Swedish producer prices and retail sales from January could dampen Krona sentiment.
If retail sales slump further than expected and producer prices stagnate, the Pound Swedish Krona (GBP/SEK) exchange rate will rise.