Pound to Swedish Krona Exchange Rate Advancing as Riksbank Rate Cut Bets Rise
After weeks of losses, the Pound Sterling to Swedish Krona (GBP/SEK) exchange rate is finally rebounding. Shifting central bank speculation as well as Sweden’s gloomy economic outlook are making a recovery easier.
Last week saw a notable GBP/SEK tumble from the interbank level of 12.59 to 12.31.
This week, GBP/SEK has continued to trend lower. The pair briefly touched on a 5-month-low of 12.02 earlier in the week, but has been rebounding slightly since then.
GBP/SEK has been able to recover a decent chunk of this week’s losses. The pair trends near the interbank level of 12.23 at the time of writing.
With Bank of England (BoE) speculation calming for now, the Pound to Swedish Krona exchange rate could continue to recover unless fresh Brexit uncertainties flare up.
Pound (GBP) Exchange Rates Climb as Bank of England (BoE) Rate Cut Bets Soften
Since yesterday, the Pound’s (GBP) weakness on Bank of England (BoE) interest rate cut speculation has softened slightly.
Sterling had been falling earlier this week on speculation that the BoE could follow the Federal Reserve with an emergency interest rate cut. Bets of rate cuts have soared amid expectations that banks will attempt to protect economies from the coronavirus.
However, yesterday incoming Bank of England Governor Andrew Bailey didn’t signal any urgent need to cut rates. As a result, bets of an emergency rate cut faded and the Pound rebounded from its worst levels.
According to Analyst at MUFG:
‘The stronger Pound reflects in part some short-term relief that the BoE has not yet quickly followed the Fed and delivered an inter-meeting rate cut,
(Bailey’s remarks) signal that the BoE is not yet at the point to pull the trigger on further easing but we still expect sufficient evidence will be in place to take policy action at their next policy meeting on the 26th March.’
Swedish Krona (SEK) Exchange Rates Weak as Riksbank Rate Cut Bets Rise
While Bank of England (BoE) interest rate cut bets are calming slightly today, bets of Riksbank interest rate cuts are rising. This is making it easier for GBP/SEK to advance today.
Even though today’s Swedish industrial production stats were stronger than forecast, Sweden’s outlook remains too gloomy. Industrial production rose to 1.5% month-on-month in January.
Sweden’s government has lowered its growth predictions, and analysts predict Covid-19’s impact on Sweden’s economy will only worsen.
What’s more, bets of an upcoming interest rate cut from Riksbank have risen as a result. According to analysts at Danske Bank, this is likely to effect the Swedish Krona (SEK) as Nordic markets had not been anticipating a rate cut until now:
‘At the same time, it raises the probability for a Riksbank rate cut in our opinion. If the Riksbank would go back into negative territory, the SEK is likely to take a hit and EUR/SEK to go higher. Especially since a cut is not anticipated by, at least, the Nordic FX community.’
Pound to Swedish Krona (GBP/SEK) Exchange Rate Sensitive to Central Bank and Virus News
This week’s notable UK and Swedish data has come and gone. The data was largely brushed over, as Pound to Swedish Krona (GBP/SEK) exchange rate investors focused on coronavirus and central bank speculation.
As a result, these factors are likely to remain the focus through the end of the week and into next week.
If the rising number of Covid-19 cases in Britain causes fresh concern among the government or Bank of England (BoE) officials, the Pound (GBP) could tumble again.
On the other hand, if upcoming Bank of England speeches continue to show a calmer dovishness, the Pound may recover a little more from its recent lows.
The Swedish Krona (SEK) may be more sensitive to the spread of Covid-19 though. Rising Riksbank interest rate cut bets could keep the currency under pressure.
On top of coronavirus and central bank developments, potential Brexit developments may also be influential. The Pound to Swedish Krona (GBP/SEK) exchange rate could climb further if UK-EU Brexit negotiations were perceived as going well.