Rising Swedish Consumer Confidence Dents Pound Swedish Krona Exchange Rate
A stronger-than-expected uptick in the latest Swedish consumer confidence index left the Pound to Swedish Krona (GBP/SEK) exchange rate trending lower.
While forecasts had pointed towards the confidence index picking up in January investors still took encouragement from the fact that it strengthened from 92.7 to 96 on the month.
This suggests a greater level of underlying resilience within the Swedish economy, even though December’s retail sales figures and unemployment rate proved less encouraging in nature.
Even though the general sense of market risk appetite weakened in the face of ongoing Covid-19 concerns this was not enough to put any particular pressure on the Swedish Krona (SEK) at this stage.
Pound Under Pressure Ahead of Nationwide Housing Price Index
Support for Pound Sterling (GBP) may continue to weaken ahead of the weekend, meanwhile, if January’s Nationwide housing price index fails to impress.
Investors expect to see a softening in the growth of the UK housing market, with prices delivering growth of just 0.2% on the month.
As a more resilient housing market has helped to limit the impact of other weak economic data in recent months a softer showing here could weigh heavily on the Pound.
Without evidence that housing prices continued to hold up their growth momentum in the face of the current national lockdown GBP exchange rates look set to weaken on Friday.
Solid Household Lending Growth to Support SEK Exchange Rates
Some fresh gains could be in store for the Swedish Krona, on the other hand, as long as household lending growth holds up in December.
As long as signs point towards an increasing level of lending within the Swedish economy, something which could help to shore up economic activity, SEK exchange rates could find additional traction.
However, if loans growth fails to sustain its previous pace this may leave the Krona vulnerable to a degree of selling pressure in the near term.
A greater level of market demand for the US Dollar (USD) could also help to limit the appeal of the more sensitive Swedish Krona in the near term.
Swedish Krona Vulnerable to Softer Manufacturing PMI and Gross Domestic Product
Looking ahead of next week, support for the Krona could fade further on the back of the latest Swedish manufacturing PMI and gross domestic product data.
After the impressive showing seen in December forecasts point towards the manufacturing PMI dipping to 59.5, still indicating solid expansion but nevertheless representing a deterioration on the month.
As markets also expect to see the Swedish GDP turn negative in the fourth quarter the potential for any further SEK exchange rate gains appears limited.
Evidence that the economy contracted in the final three months of 2020 would expose the Swedish Krona to a wave of selling pressure, with investors bracing against the potential for a further loss of momentum in the months ahead.