August 5, 2019 - Written by Ben Hughes
STORY LINK GBP to SEK Exchange Rate Pressured by Brexit Fears and Swedish Services PMI
While the Swedish Krona’s movement was mixed last week, the British Pound to Swedish Krona (GBP/SEK) exchange rate has been unable to continue the recovery rally it saw towards the end of last week. This is because, despite some stronger than expected UK data today, the Pound outlook remains dominated by worsening no-deal Brexit fears while the Swedish Krona finds some modest support in the latest Swedish data.
Last week saw GBP/SEK open at the level of 11.76 and briefly tumble to a low of 11.51 – which was the worst GBP/SEK level since January. While GBP/SEK recovered most of its losses towards the end of the week and closed the week at the level of 11.71, the pair has been unable to continue this recovery and was still trending near the week’s opening levels at the time of writing on Monday afternoon.
GBP Exchange Rates Remain under Pressure on Brexit Fears despite Rising UK Services Data
Demand for the Pound was highly mixed yesterday, as the currency struggled to find the drive to recover further following last week’s selloff inspired by no-deal Brexit fears.
The Pound saw a notable recovery towards the end of last week’s session, as it took advantage of Swedish Krona weakness to rebound from its cheapest levels in profit-taking.
However, the Pound’s recovery was short-lived, and the British currency has been unable to keep climbing today despite some fresh support.
This morning, Markit and CIPS published its July services PMI. The data was expected to remain at 50.2, but instead unexpectedly improved to 51.4. As services make up a good chunk of Britain’s economic activity, the data would typically have bolstered Sterling.
The data was not strong enough to notably change the Pound outlook though, as analysts warned that Britain’s economic outlook remained concerning overall.
According to Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply:
‘While services activity grew in July, this marginal improvement on last month is a smokescreen. Fundamental weaknesses remain in a sector pinned down by Brexit uncertainty and increasingly stagnant global economic growth.’
Sterling remained weak overall, as officials from the UK government continued to insist that Britain would leave the EU on the 31st of October regardless of whether or not a deal had been agreed.
SEK Exchange Rates Steadies on Stronger PMI Data Following Last Week’s Weakness
The Swedish Krona was one currency that failed to capitalise on the Pound’s selloff last week, due to its own weakness.
Sweden’s Q2 Gross Domestic Product (GDP) growth rate projections were published last week, and came in well below expectations, indicating that Sweden’s economy unexpectedly contracted in Q2.
Investors sold the Swedish Krona following the news, amid speculation that Riksbank
may not be as hawkish with expected rate hikes as previously expected.
Since then, the Swedish Krona has been steadying slightly due to some stronger than expected Swiss PMI data, preventing investors from selling the currency even lower.
Thursday saw the publication of Sweden’s July manufacturing PMI, which came in at 52.0 rather than the expected 50.5.
Today’s Swedish services PMI was similar, rising from 49.8 to 52.3 and escaping contraction.
GBP/SEK Exchange Rate Forecast: Brexit Dominates Direction with Swedish Production Ahead
The Pound to Swedish Krona exchange rate’s movement has been relatively narrow this week so far, despite today’s Brexit jitters and services data. This is because the latest news has not done much to change the GBP/SEK outlook.
Much of last week’s sharpest movements were caused by no-deal Brexit fears and speculation, but Swedish data was influential as well.
As a result, GBP/SEK investors are anticipating further potential Brexit developments, as well as upcoming Swedish data.
Investors are unlikely to buy the Pound much without some kind of optimistic Brexit development, so GBP/SEK could remain under pressure as Brexit developments are anticipated.
Tomorrow’s Swedish industrial production and new orders data from June could cause some Swedish Krona data if it surprises investors.
Failing any surprising developments though, the Pound to Swedish Krona exchange rate may see narrower movement for much of the week, as investors anticipate Friday’s Swedish household consumption and UK growth rate results.
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TAGS: Pound Sterling Forecasts