Pound Sterling Swedish Krona (GBP/SEK) Exchange Rate Flat as Swedish Private Production Beats Expectations
The Pound Sterling Swedish Krona (GBP/SEK) exchange rate remained largely flat this morning, leaving the pairing trading at around 11.6850Kr.
The Swedish Krona was left muted after data revealed private production contracted due to the coronavirus pandemic.
However, SEK was able to prevent a significant slump as private production did not slump as much as forecast.
This comes despite the economy feeling the full force of the coronavirus crisis and efforts made to slow the spread of the virus.
Output across all sectors declined by -9% after a -6.5% decline in March.
The industrial sector was the worst-hit sector, as month-on-month, production plummeted by -16.4% in April. Annual Swedish industrial production slumped at an annual rate of -16.6%.
According to Nordea economist, Torbjorn Isaksson:
‘The service sector is more resilient than we thought. We, like the Riksbank, had expected GDP to fall by 10% in the second quarter, but now it looks to be better than that.’
While the country has not gone into total lockdown, companies have been badly hit as domestic demand fell and its export markets shrunk.
While the government launched measures worth around 245 billion SEK and Riksbank flooded the market with liquidity, economists expect the economy to suffer its worst slump since WWII.
Sterling (GBP) Flat as the Construction Sector ‘Staggers Back to Work’
Meanwhile, construction PMI data from the UK revealed the coronavirus slump has only eased slightly in May.
Markit’s construction PMI rose from April’s record low 8.2 to 28.9 in May. This makes this the third-worst reading in the survey’s history.
This dampened Sterling sentiment and left GBP/SEK flat.
Commenting on this morning’s data, Group Director at the Chartered Institute of Procurement and Supply, Duncan Brock noted:
‘The construction sector suffered one of its worst results in May since the PMI surveys began as building work was grounded by the pandemic and lockdown measures.
‘As the sector staggers back to work, and builders put their heads above the parapet, they face a number of obstacles. New safer working practices will ensure operations can continue but client confidence to place new orders is harder to predict. As the furlough scheme is unravelled towards the end of the summer, the floodgates preventing redundancies may also fly open and job losses will follow without a strong pipeline of work waiting in the wings. It will take a long time for the sector to build strength from the ruins of COVID-19.’
UK-EU Post-Brexit Trade Talks in Focus
The Pound has been able to strengthen its position this week on Brexit optimism. This allowed Sterling to rise to a one-month high against the US Dollar (USD) on Wednesday.
GBP rallied as the UK indicated it may be willing to compromise with the European Union on key sticking points. This could allow both sides to reach a post-Brexit trade deal in time.
Prime Minister Boris Johnson now has until the end of June to request an extension of the current transition period. A Reuters poll showed the Pound would give up recent gains and slump if Britain does not ask for an extension.
According to James Smith at ING:
‘The fading prospect of an extension to the post-Brexit transition period, and the risk of supply chain disruption at the start of 2021, casts a cloud over [Britain’s] GBP outlook.
‘Brexit is back in the spotlight. There’s little to suggest we should expect any real progress, and that’s one reason why we’ve seen some risk premium creep back into the Pound.’
Pound Swedish Krona Outlook: UK-EU Talks and Consumer Confidence in Focus
Looking ahead, the Pound (GBP) could rise against the Swedish Krona (SEK) following an increase in Brexit optimism.
If traders continue to remain optimistic about post-Brexit trade talks between the UK and EU, Sterling will receive a boost.
However, these gains could be short-lived following Friday’s release of Britain’s consumer confidence data.
If GfK reveals May’s sentiment deteriorated further, it could leave the Pound Swedish Krona (GBP/SEK) exchange rate flat.