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GBP to SEK Exchange Rate Edges Away from Weekly Lows on Swedish Inflation and Bank of England News

July 11, 2019 - Written by John Cameron

While the British Pound to Swedish Krona (GBP/SEK) exchange rate is still on track to see losses this week, the pair may recover slightly from its weekly lows over the coming days, especially if investors remain optimistic about today’s Bank of England (BoE) comments. The Swedish Krona also weakened slightly following today’s key Swedish inflation figures.

Still, despite signs that things could rebound, GBP/SEK is still on track to have lost last week’s gains. GBP/SEK opened last week at the level of 11.79 and fluctuated, before closing the week higher at the level of 11.83. GBP/SEK rebounded from last week’s worst levels in profit-taking, as the pair had touched on its worst levels since January.

Demand for the Pound remains fairly mixed overall, and this week’s UK data has not been enough to make investors more optimistic about Britain’s economic outlook. At the time of writing, GBP/SEK was trending closer to the level of 11.78.

Sterling has found slightly stronger support today though, thanks to fresh comments from Bank of England (BoE) Governor Mark Carney.

GBP Exchange Rates Find Support in Hopes that Britain Financial System Would Survive Worst Brexit Outcome

Investors have remained generally hesitant to buy the Pound in recent sessions, with fears of a possible no-deal Brexit persisting, and UK data continuing to show signs of being negatively impacted by Brexit uncertainty.

This is why Sterling has spent most of the week so far trending lower against a resilient Swedish Krona, at least until today’s Bank of England (BoE) news.

Today saw the Bank of England publish its latest UK financial stability data, and Governor Mark Carney also made some fresh comments about Britain’s economic outlook and the risks facing it.

Perhaps most notable was the bank’s indication that it believed Britain’s banks and financial system would ultimately survive both a no-deal Brexit and a full scale trade war if it came down to it.

In comments that came as a slight relief amid all the rising no-deal Brexit fears lately, the bank said that Britain’s banks were likely ready for the possibility.

However, despite saying that banks would survive a no-deal Brexit, Carney reasserted that such an outcome would still cause a lot of trouble for Britain’s economy. According to Carney:

‘It also doesn’t mean economic stability. Even with a smooth adjustment it would still be a major economic adjustment, a major economic shock, virtually instantaneously.’

SEK Exchange Rates Slip as Swedish Inflation Falls Short of Expectations

Following days of modest gains for the Swedish Krona, the currency slipped back slightly today in reaction to Sweden’s June inflation rate results, as well as a slightly more appealing Pound.

This morning’s Swedish inflation stats fell short in year-on-year figures. June’s inflation rate was expected to print at 1.9% but slowed to 1.8%, while the CPIF figure slowed to just 1.7% rather than the forecast 1.8%.

Still, despite the slightly weaker inflation figures, analysts predicted that they would not have a notable impact on Riksbank interest rate hike bets.

According to James Smith, Developed Markets Economist at ING, Riksbank is likely still on track to hike Sweden’s interest rates again over the next year:

‘Importantly, the Riksbank has already factored all of this into its forecasts and in fact the June CPIF figure was slightly above what they had anticipated in the latest inflation report. In principle then, there's nothing in these latest figures to alter the Riksbank's guidance that rates could rise again as soon as late-2019.’

With Riksbank expected to remain relatively hawkish despite the dovishness of other major Central Banks, the Swedish Krona outlook remains strong.

GBP/SEK Exchange Rate Forecast: Central Bank Speculation and UK Data Ahead

With the economic calendar now quiet until the end of the week, the Pound to Swedish Krona exchange rate is likely to end the week lower.

There is still potential for the Pound to recover further or for the Krona to drop lower before the end of the week if there are any surprising developments in UK politics or Central Bank speculation.

For example, if any comments from Bank of England (BoE) officials cause a rise in BoE interest rate cut bets or there are fresh no-deal Brexit fears, Sterling will be under deeper pressure again.

With Riksbank interest rate hike bets persisting, it’s also unlikely that investors will have much reason to sell the Swedish Krona.

Looking ahead to next week, the Pound to Swedish Krona exchange rate could be influenced by upcoming UK job, inflation, and retail sales stats.
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