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GBP to SEK Exchange Rate Gains on Risk-Sentiment and SEK Weakness

January 27, 2021 - Written by James Fuller

Despite underwhelming UK data lately and a dire coronavirus infection and death rate, the British Pound to Swedish Krona (GBP/SEK) exchange rate is climbing today. The Pound is benefitting from risk-sentiment, while the Swedish Krona continues to sold on the Riksbank’s recent shifts in monetary policy action.

Since opening this week at the level of 11.35, GBP/SEK has been trending with a largely upside bias. GBP/SEK has been jumping higher since yesterday, and at the time of writing is trending in the region of 11.44.

Whil still below last week’s high of 11.46, GBP/SEK continues to benefit from the recent Swedish Krona selloff. Still, Britain’s coronavirus outlook remains concerning so the pair’s potential for gains is limited as well.

GBP Exchange Rates Benefitting from Vaccination Hopes

Yesterday, the UK passed 100,000 coronavirus-related deaths. The nation’s infection rate remains high, and there are many concerns that the pandemic will continue to harm lives and the economy for months to come.

Despite this though, the Pound has been more bullish since yesterday. Rather than focusing on current coronavirus pandemic fears, investor are buying the British currency due to vaccination and recovery hopes.

As Britain’s vaccination programme has advanced further than some other major economies’ plans have, the Pound has become more correlated with vaccination hopes. In fact, this is the primary cause of the British currency’s recent strength.

This is taking focus for Pound investors today and helping it to capitalise on Swedish Krona losses.

It comes despite continued signs if weakness in UK data and of course Britain’s dire coronavirus situation.

Today’s UK retail data from the British Retail Consortium (BRC) was concerning, showing the biggest drop in sales since May 2020. The report said:

‘The trade body said that its members saw average prices fall by 2.2% in January compared with a year earlier, the largest such fall since the depths of Britain’s first lockdown in May.

Food prices rose by 0.2%, the smallest increase since January 2017, and non-food prices dropped by 3.6%.’

According to Helen Dickinson, Chief Executive at BRC:

‘Post-Christmas sales and the national lockdown drove non-food prices down – especially for clothing and DIY goods.

Brexit-related red tape, rising global shipping costs and food commodity prices, as well as the weight of forced closures and restrictions for many retail businesses, means that pricing pressures are stacking up’

SEK Exchange Rates Continue to be Driven Lower by Riksbank’s Shift in Tone

Riksbank, Sweden’s central bank, has recently made a shift in direction on foreign reserves. Even with this week’s Swedish inflation and trade data beating forecasts, the Swedish Krona remains unappealing overall as markets continue to digest the Riksbank news.

Riksbank recently said that it would revamp its foreign reserves, a considerable shift in framework that came as a big shock to markets.

Importantly, the shift was also seen as a way to combat the strength of the Swedish Krona, which has seen broad strength over the past year.

What’s more, the Riksbank continues to make comments that weigh further on the Swedisn Krona. According to Riksbank Deputy Governor Cecilia Skingsley, the bank has not ruled out the possibility of taking rates to negative territory.

She said:

‘We have not ruled out going into negative rate territory again,’

GBP/SEK Exchange Rate Forecast: Will Swedish Krona Selloff Slow?

Investors may continue to buy the Pound to Swedish Krona exchange rate in the coming sessions, if markets remain optimistic about Britain’s coronavirus vaccination outlook.

The Pound will continue to be boosted by vaccine hopes unless there is a fresh complication in the vaccination rollout. This will likely be the focus for the Pound in the coming sessions, amid a lack of notable UK data due for publication.

Investors may continue to find the Swedish Krona unappealing as they continue to digest the Riksbank’s latest moves, but upcoming Swedish data could offer the Krona a little support if it impresses.

Thursday’s European session will see the publication of a lot of key Swedish data. Swedish confidence data, unemployment data and retail sales stats will all be published.

If these stats all impress markets, investors may defy the Riksbank’s concerns over SEK strength and continue to buy the currency.

Of course, developments over the coronavirus pandemic across the globe will continue to be watched closely by Pound to Swedish Krona exchange rate investors as well.
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