GBP/SEK Exchange Rate Rallies on European Banking Rout
(Updated: 12:05, 15/3/23) The Pound Swedish Krona (GBP/SEK) exchange rate is on the rise this afternoon. GBP/SEK has rebounded from its initial losses and is currently up 0.4% on the day.
The rebound comes as SEK investors reassess expectations for a 50bps rate hike from the Riksbank next month.
Stronger-than-expected core inflation in Sweden boosted rate hike bets at the start of the European trading session.
However a subsequent plunge in European bank shares, led by Swiss banking giant Credit Suisse, is leading markets to reprice central bank interest rate expectations.
Tempering the rise in GBP/SEK is a sense of caution ahead of Chancellor Jeremy Hunt’s Spring Budget.
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Pound Swedish Krona Exchange Rate Undermined by Soaring Swedish Inflation
The Pound Swedish Krona (GBP/SEK) exchange rate trades just shy of a one-week low this morning. As a surge in Sweden’s core inflation figures underpins demand for the Krona.
At the time of writing the GBP/SEK exchange rate is trading at around SEK12.6640. Down roughly 0.4% from this morning’s opening rate.
Swedish Krona (SEK) Rallies as Strong Inflation Places Pressure on the Riksbank
The Swedish Krona (SEK) is strengthening against the Pound (GBP) and the majority of its other peers this morning.
The Krona’s broad-based strength comes on the back of Sweden’s latest consumer price index.
Sweden’s headline CPI release meet expectations, with inflation printing at 9.4%. However core inflation was shown to have climbed from 8.7% to 9.3%, versus forecasts it would slow to 8%.
This is the second consecutive month in which inflation has outpaced expectations. This is expected to harden the resolve of Riksbank policymakers to continue raising interest rates.
The collapse of Silicon Valley Bank (SVB) previously saw SEK investors rein in their Riksbank rate hike expectations.
But speaking earlier this week Riksbank Governor Erik Thedeen said the bank will ‘continue to look at incoming data’ before determining what action to take at its April policy meeting.
In light of today’s inflation figures SEK investors are now speculating the Riksbank will need to raise interest rates by at least 50bps next month. The Krona is also being underpinned by suggestions rates might climb above 4% in 2023, versus the Riksbank’s forecast for a peak of 3.33%.
Pound (GBP) Muted as Markets Brace for Unveiling of Spring Budget
The Pound is trapped in a narrow range so far this morning. GBP investors are reluctant to make any bullish bets on Sterling ahead of the UK’s Spring Budget.
Chancellor Jeremy Hunt will unveil his new spending and tax plans later this afternoon. GBP investors will be on the lookout for any measures which may help to boost UK growth.
An improving UK economic outlook and a surprise surplus in public sector finances in January may allow the Chancellor to loosen the purse strings a little.
Measures already unveiled include more support for households through expanded childcare support and help for energy bills.
Hopes these could help the UK avoid a recession may prop-up demand for the Pound today. So long as Hunt doesn’t rock the boat.
Pound Swedish Krona Exchange Rate Forecast: SVB Fallout to Continue to Influence GBP/SEK?
The outlook for the Pound Swedish Krona (GBP/SEK) exchange rate in the second half of the week looks increasingly uncertain in light of the US banking crisis.
The collapse of SVB continues to cast a long shadow over the financial sector. Fluctuating US interest rate expectations could continue to infuse volatility into the currency market.
Meanwhile, the end of the week will see the publication of Sweden’s latest jobs report. Will a drop in unemployment reinforce Riksbank rate hike bets and boost the Krona?