Pound Swedish Krona (GBP/SEK) Exchange Rate Dented as Swedish Unemployment Unexpectedly Falls

Improved Unemployment Rate Sees Pound Swedish Krona (GBP/SEK) Exchange Rate Trending Lower

An unexpected improvement in the Swedish unemployment rate saw the Pound to Swedish Krona (GBP/SEK) exchange rate knocked off its positive footing.

Investors were impressed as the unemployment rate dipped from 7.8% to 7.7% in November, defying forecasts of a dramatic increase to 8.4%.

This surprise turnaround in the health of the Swedish labour market encouraged the Swedish Krona (SEK) to push higher against its rivals over the course of the day.

With unemployment still appearing largely under control in Sweden, in spite of its elevated state, SEK exchange rates generally benefitted from the news.

Fluctuating Odds of UK-EU Trade Deal Diminish GBP Exchange Rate Strength

Comments from Boris Johnson put something of a dampener on Pound Sterling (GBP), meanwhile, as he noted that trade on World Trade Organisation (WTO) terms still appears the most likely outcome of talks.

This limited some of the positive momentum of GBP exchange rates today, even as EU officials signalled that the two sides could reach an agreement as soon as Friday.

These mixed messages appear indicative of the divide that remains between the UK and EU, especially as the key issue of fishing rights reportedly continues to prove a sticking point.#

With the end of the Brexit transition period fast approaching the Pound could struggle to hold onto its earlier optimism as the odds of an eleventh hour deal appear to fade.

Rising Covid-19 Cases Set to Limit Swedish Krona Appeal

However, support for the Swedish Krona could easily falter in the days ahead thanks to Sweden’s deteriorating Covid-19 situation.

While the country largely escaped the earlier months of the pandemic relatively unscathed, avoiding the implementation of a strict national lockdown, cases saw a sharp spike in recent days.

This suggests that a second wave could have a more significant impact on the Swedish economy, particularly with the current lack of restrictions in place to limit the risk of a further rise in infections.

If Covid-19 cases continue to rise rapidly in Sweden this would leave SEK exchange rates exposed to selling pressure, with doubts over the economic outlook set to rise in response to fresh disruption.

Sharp Drop in UK Retail Sales to Fuel Pound Weakness

On the other hand, the Pound could fall further out of favour with investors ahead of the weekend with the release of November’s UK retail sales data.

Forecasts point towards a sharp monthly decline of -4.2% in sales growth, reflecting the impact of the second national lockdown.

As higher levels of consumer spending have helped to balance out other areas of economic weakness in the past any decline here could weigh heavily on the GBP/SEK exchange rate.

Unless retail sales can better expectations, limiting some of the monthly decline, the Pound looks set to lose some of its appeal tomorrow.

Any fresh doubts over the possibility of an imminent UK-EU trade deal could also put pressure on the GBP/SEK exchange rate, meanwhile.