Pound Swedish Krona (GBP/SEK) Exchange Rate Falls as Britain Enters a Recession

Pound Sterling Swedish Krona (GBP/SEK) Exchange Rate Slides as UK Economy Shrinks by -20.4%

The Pound Sterling Swedish Krona (GBP/SEK) exchange rate slumped by around -0.4% on Wednesday morning. This left the pairing trading at around 11.3883Kr.

The Pound remained under pressure today after the latest growth data showed the British economy shrank by a record -20.4% in Q2. This was the first time the country’s economy had entered a technical recession in 11 years.

The economy contracted between April and June when the coronavirus restrictions were the strictest. This was also the largest contraction posted by any major economy so far during the coronavirus crisis.

Markets also expect a wave of job losses to hit the economy later this year when the government ends its furlough scheme.

Although, there were some signs of a recovery in June as output rose 8.7% between May and June.

British finance minister, Rishi Sunak noted there were ‘promising signs’ the economy was recovering. Although he did note there was too much uncertainty to know if the country would have a swift v-shaped recovery.

However, some analysts noted that this was likely reflected a catch-up in activity which was suppressed during the coronavirus lockdown.

Suren Thiru, an economist with the British Chambers of Commerce noted the pick-up in June likely reflected the release of pent-up demand. He noted:

‘The prospect of a swift ‘V-shaped’ recovery remains remote as the recent gains in output may fade over the coming months as the economic damage caused by the pandemic increasingly weighs on activity, particularly as the government support measures wind down.’

Upbeat Inflation Buoys the Swedish Krona (SEK)

The Swedish Krona rose during today’s session after data revealed inflation edged up 0.2% in June.

This followed monthly gains of 0.6% in both May and June. Annual inflation rose by 0.5% in July which likely offered some support, and followed June’s increase of 0.7%.

Meanwhile, core consumer prices rose by 0.5% last month, which also offered SEK some support.

However, traders focused on the latest UK GDP data which sent the pairing lower and allowed the Krona to make significant gains.

Pound Swedish Krona Outlook: Will GBP Claw Back Today’s Losses?

Looking ahead, Pound (GBP) traders are likely to focus on the latest UK growth data, which could send the currency lower against the Swedish Krona (SEK).

Meanwhile, due to a lack of economic data trader attention is likely to turn back to Brexit and ongoing negotiations between the UK and EU.

Britain’s Chancellor, Rishi Sunak noted today that good progress had been made in several areas of negotiations. Although, there were gaps on ‘a couple of big issues’ between London and Brussels.

If further reports reveal Britain and the Eurozone are progressing further in trade negotiations, it will offer GBP support. This could allow the Pound Swedish Krona (GBP/SEK) exchange rate to claw back some losses.

Millie Empson

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