Greater Riksbank Policy Easing Offers Boost to Pound Swedish Krona (GBP/SEK) Exchange Rate
After the Riksbank delivered a greater-than-expected expansion of its asset purchase programme the Pound to Swedish Krona (GBP/SEK) exchange rate found some modest gains.
As the central bank expanded its quantitative easing programme to 700 billion Swedish Krona (SEK) this left the currency on the back foot against its rivals.
Demand for the Krona naturally weakened as policymakers also appeared to leave the door open to the potential for further action, highlighting the decline in growth forecasts globally.
Comments that the key interest rate will likely remain at zero in ‘the coming years’ also weighed on the Swedish Krona, leaving investors with little reason to favour the currency.
Plunging UK Car Production Fuels Pound Weakness
Even so, the strength of Pound Sterling (GBP) proved limited in the wake of October’s UK car production data.
A deepening decline in production put a dampener on GBP exchange rates, with the figure falling -18.2% on the year.
This offered fresh evidence of the increasing pressure coming to bear on the UK manufacturing sector, adding to existing worries over the economic outlook.
With the economy looking increasingly likely to see the gross domestic product contract in the fourth quarter support for the GBP/SEK exchange rate was relatively muted.
Swedish Krona Looks for Support on Retail Sales and Trade Data
The Swedish Krona could find a rallying point ahead of the weekend, however, if October’s trade balance and retail sales figures show an improvement.
Stronger growth in retail sales at the start of the fourth quarter could help to limit anxiety over the health of the Swedish economy, at least in the short term.
However, as forecasts point towards a -0.1% contraction in sales volumes on the month this could see SEK exchange rates shedding fresh ground.
If the trade surplus narrows this would add to the bearish picture of the Swedish outlook, giving Riksbank policymakers greater cause for caution in the months ahead.
Lack of Brexit Resolution Set to Limit GBP/SEK Exchange Rate Upside
In the absence of any resolution to the ongoing Brexit issue the potential for further GBP/SEK exchange rate gains may remain muted, though.
As long as the possibility of a no deal scenario remains on the table this could keep the Pound from making any significant gains in the days ahead.
Until the two sides show signs of reaching an agreement on outstanding key issues fears of a disruptive end to the transition period could weigh heavily on GBP exchange rates.
A lack of UK-EU trade deal would leave the economy more vulnerable to a contraction in the fourth quarter, given the increased pressure such a result would put on already-struggling UK businesses.