November 12, 2020 - Written by Tim Boyer
STORY LINK GBP to SEK Exchange Rate Gives Up Gains as Growth Fears Knocks Sterling
Despite surging coronavirus cases in Sweden, the British Pound to Swedish Krona (GBP/SEK) exchange rate is falling today. Investors are selling the Pound in response to concerns over Britain’s concerning economic outlook for the winter, while the Swedish Krona is benefitting from rising trade sentiment amid this week’s coronavirus vaccine news. Still, as Sweden’s coronavirus situation worsens, could the Swedish Krona be in for weakness in the coming weeks?
Since opening this week at the level of 11.36, GBP/SEK has been seeing mixed and volatile trade. At the beginning of the week, GBP/SEK slipped and hit a low of 11.27. This was the worst level for the pair in almost two months, since mid-September.
After touching this low, GBP/SEK rebounded and struck a weekly high of 11.47. However, this was still not as strong as last week’s levels and the pair has already fallen back from these highs.
At the time of writing on Thursday, GBP/SEK trends in the region of 11.33. This puts it below the week’s opening levels.
GBP Exchange Rates Hit by Expectations of Rough Winter Holiday Period
After a few days of surging on optimism around a coronavirus vaccine, the Pound is tumbling again today.
While markets are optimistic about a vaccine, it is widely expected that it would still be at least a few months out. It has the potential to notably boost economic activity next year, but economies will continue to struggle with the coronavirus pandemic until then.
As a result, today’s UK growth data painted a gloomy pictured for Britain’s key holiday period.
Britain’s Q3 growth rate showed a record rebound in growth, but even then it fell short of expectations.
The data also showed that growth slowed notably in September, and pointed towards an even sharper slowdown in Q4 as Britain heads back into national lockdown.
Analysts predict that the winter holiday period, usually a highly profitable season, could instead see recession this year.
According to Markus Kugur, Chief Economist at Dun and Bradstreet:
‘National and local lockdowns put immense strain on every sector, but one that faces tremendous difficulty, and is a particular cause for concern, is the eating and drinking sector where there’s been a significant 54% quarter-on-quarter increase in corporate liquidations in Q3 2020’
Today’s UK business investment and production results also did little to boost Pound spirits, with data falling short of expectations and expected to get worse before it gets better.
SEK Exchange Rates Boosted by Market Sentiment despite Surging Coronavirus Cases in Sweden
Sweden’s handling of the coronavirus pandemic has been unique among major economies. Unlike many other economies, Sweden has generally avoided nationwide lockdowns and strict restrictions.
This approach, considered experimental, has seen mixed response. While the nation appeared to avoid a huge surge in cases earlier in the year, cases are now surging in Sweden.
More parts of Sweden are considering localised measures to contain the virus as a result.
However, despite this the Swedish Krone has been strong, and continues to strengthen today.
Sweden’s economy has been performing strongly due in part to its lack of strict lockdown so far.
On top of this, coronavirus vaccine news has boosted hopes for global recovery in economies and demand over the coming year.
This has considerably boosted trade sentiment and overall market sentiment, which also benefits the Swedish Krona.
Today’s Swedish inflation rate data was a little weaker than expected year-on-year, but this ultimately had little impact on the Swedish Krona’s movement.
GBP/EUR Exchange Rate Forecast: Brexit Optimism Could Bolster Sterling Appeal
While the Pound has been hit by today’s UK growth rate report and a gloomy growth outlook, there is still potential for the Pound to see a strong surge in demand in the coming weeks.
Markets generally expect that UK and EU will reach a deal on Brexit before the end of the month. Speculation has risen in recent sessions that a deal will be presented next week sometime.
If there is a Brexit deal of some kind shown next week, and it leads to optimistic developments in reaching a deal, the Pound outlook is likely to rise. This could make the Pound much more appealing, as Brexit uncertainty is one of the primary causes of Pound weakness.
However, it is still possible for Brexit relations to fall through. In the event a no-deal Brexit becomes more likely, the Pound is likely to tumble instead.
Brexit is likely to take the focus for Pound exchange rates next week, but both Sterling and the Swedish Krona will continue to be influenced by coronavirus developments as well.
Upcoming comments from Bank of England (BoE)
officials could also influence the Pound to Swedish Krona exchange rate if they surprise investors.
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TAGS: Pound Sterling Forecasts