Pound Sterling Swedish Krona (GBP/SEK) Exchange Rate Falls despite Sweden’s Plunge in GDP
The Pound Sterling Swedish Krona (GBP/SEK) exchange rate fell by around -0.3% on Wednesday morning. This left the pairing trading at around 11.3765Kr.
The Swedish Krona remained muted against Sterling during today’s session after Sweden suffered a record drop in GDP.
Sweden’s flash GDP tumbled by a record -8.6% in the second quarter thanks to the coronavirus crisis. This decline was the worst in modern history, dwarfing the -3.8% fall in Q4 2008 during the financial crisis.
However, the Krona received some support as the Swedish economy outperformed much of the rest of Europe during the second quarter.
Q2 GDP plummeted by -12.1% in the Eurozone, while Italy suffered a -12.4% contraction and Spain an eye-wateringly large contraction of -18.5%.
Sweden’s response to the coronavirus pandemic has been different to the rest of Europe. The country relied on mainly voluntary measures and analysts expect the economic slump will not be as severe as countries that adopted stricter lockdown measures.
In a note, senior Europe economist at Capital Economics, David Oxley wrote:
‘The economic crunch over the first half of the year is in a different league entirely to the horror shows elsewhere in Europe.’
Sterling (GBP) Slides despite Businesses Growing at Fastest Rate in Five Years
Meanwhile, the Pound remained under pressure on Wednesday as markets await tomorrow’s Bank of England (BoE) monetary policy meeting.
Added to this, a new study published yesterday claimed that a second wave of the coronavirus pandemic could twice as bad as the initial outbreak.
Sterling continued to struggle despite an upbeat services PMI. Data revealed that British manufacturing and services businesses grew at the fastest rate in more than five years in July.
The services PMI hit a five-year high of 56.5, rising from June’s dire reading of 47.
Commenting on the data, Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:
‘The services sector showed a strong return to form at the beginning of the third quarter, with the sharpest rise in overall activity since July 2015 and with new orders making a comeback at the fastest pace since the beginning of the year.’
However, the PMI figures reflect the rate of growth rather than the level of output. Some economists believe it will take the country years to recovery the record -25% of output lost during the start of the lockdown.
Pound Swedish Krona Outlook: BoE in Focus
Looking ahead to Thursday, the Pound (GBP) may slide against the Swedish Krona (SEK) following the Bank of England’s (BoE) meeting.
While the bank is not expected to cut interest rates further this month, speculation about policymakers taking rates into negative territory has grown.
If the bank hints policymakers may send rates into negative territory, it will weigh on Sterling sentiment. This will send the Pound Swedish Krona (GBP/SEK) exchange rate lower.