Pound Sterling Swedish Krona (GBP/SEK) Exchange Rate Slumps as British Inflation Slides
The Pound Sterling Swedish Krona (GBP/SEK) exchange rate slumped by around 0.4% this morning. This left the pairing trading at around 11.7415Kr.
The Pound slumped after data revealed inflation in the UK slowed to its lowest level since June 2016.
May’s consumer prices fell to 0.5% from April’s 0.8%, weighing on Sterling sentiment.
Prices fell as the coronavirus pandemic hurt the global economy. This caused oil prices to slide, and sent inflation to a four-year low.
This means the Bank of England (BoE) is free to ramp up its stimulus programme once again during tomorrow’s meeting.
Many economists expect the central bank will announce an extra £100 billion of bond purchases during Thursday’s meeting.
According to chief investment officer at asset management firm Premier Miton, Neil Birrell:
‘Inflation is not something that is going to worry the Bank for some time. It will be more concerned about growth.’
Meanwhile, some economists expect headline inflation to remain below 1% this year. According to ING’s developed markets economist, James Smith:
‘The other argument that is often made in favour of inflation returning, is that governments and central banks are pumping vast amounts of cash into the system. But this is unlikely to lead to higher prices, at least in the short/medium-term. In the case of the government, its spending has so far been solely aimed at keeping firms and consumers afloat, rather than trying to stimulate demand (which by definition, is constrained by the ongoing lockdown measures).
‘The bottom line is that inflationary pressures are likely to remain fairly muted for the time being. This, in turn, will keep the pressure on the Bank of England to maintain its current degree of stimulus, and we expect a further £150 billion of QE to be unveiled this week.’
Swedish Krona (SEK) Rises despite Unemployment Jumping to Six-Year High
Meanwhile, the Swedish Krona rallied against the Pound despite data showing Sweden’s jobless rate increased.
The country’s unemployment rate jumped to its highest level since June 2014. Joblessness in Sweden rose above expectations to 9% in May from April’s 7.1%.
The labour market felt the effects of the coronavirus pandemic despite the country not imposing a full lockdown.
However, this did little to stop the Swedish Krona sliding against the Pound as weak inflation and Brexit worried continued to weigh on the British currency.
Pound Swedish Krona Outlook: Bank of England (BoE) in Focus
Looking ahead, the Pound (GBP) could extend today’s losses against the Swedish Krona (SEK) ahead of Thursday’s monetary policy meeting.
GBP will remain under pressure if the Bank of England (BoE) is downbeat about the country’s economic forecasts, and highlights weak data such as today’s downbeat inflation statistics.
However, with Brexit uncertainties continuing to weigh on the Pound, the British currency may receive a slight boost on any optimistic reports.
The UK and EU agreed on Monday negotiations about future relations would be stepped up, and Prime Minister Boris Johnson suggested the two side should reach an agreement by July. If there are upbeat reports on UK-EU negotiations it will offer Sterling some support this week and send the Pound Swedish Krona (GBP/SEK) exchange rate higher.