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GBP to SEK Exchange Rate Reaches 4-Month-Best as Sterling Capitalises on Krona’s Weakness

February 5, 2021 - Written by John Cameron

Despite stronger than expected Swedish data today, the Swedish Krona’s bearish streak continues, and the British Pound to Swedish Krona (GBP/SEK) exchange rate has been able to capitalise on that this week. Investors piled into the Pound on Bank of England (BoE) news yesterday, making it even easier for the bullish Pound to sustain big gains against the bearish Swedish Krona over the past week.

It’s been another broadly bullish week for GBP/SEK. The pair opened the week at the level of 11.45 and has spent the week trending with an upside bias.

Sterling slipped in the middle of the week on Bank of England (BoE) uncertainty, but yesterday’s BoE news saw the Pound surge higher once again.

This morning, GBP/SEK touched on a high of 11.59. This was the best level for GBP/SEK in over four months, since September 2020. At the time of writing on Friday, GBP/SEK trends a little lower in the region of 11.56, but is still on track to see huge gains this week.

GBP Exchange Rates Surge as Bank of England (BoE) Negative Rate Speculation Eases Back

The Pound has seen strong performance for much of the past week, as the British currency benefits from rising hopes for Britain’s coronavirus vaccine rollout.

However, the British currency’s appeal spiked even higher following yesterday’s Bank of England (BoE) policy decision.

Speculation had been high in recent months that the BoE could be forced to implement negative interest rates in the coming months. The bank’s discussions over negative rates were being taken very seriously, with some seeing the talks as a signal that negative rates were becoming more likely.

As a result, yesterday’s comments from the BoE over the controversial negative rates system was a big relief to markets.

The bank said that while UK banks needed to make sure they were prepared to handle the possibility of negative rates, it did not intend to send any signals on negative rates being remotely imminent.

On top of this, the bank’s outlook was overall positive, with Governor Andrew Bailey predicting that vaccine rollout could help Britain’s economy recover later in 2021. He said:

‘The monetary policy committee’s central forecast assumes that Covid-related restrictions and people’s health concerns weigh on activity in the near term, but that the vaccination programme leads to those easing, such that gross domestic product is projected to recover strongly from the second quarter of 2021, towards pre-Covid levels.’

As a result, many analysts no longer expect negative interest rates this year, with some saying that negative rates could be avoided entirely.

SEK Exchange Rates Weak Ahead of Riksbank Policy Decision

While most of this week’s Swedish data was fairly strong, it was not enough to boost demand for the recently bearish Swedish Krona.

Investors have been selling the Swedish Krona en masse since Riksbank announced it was shifting its strategy on foreign reserves. The shock to the Krona has seen it sold from very high levels in recent weeks, and the Pound continued to climb against it this week.

The Krona’s selloff extended a little on Sweden’s weaker than expected Gross Domestic Product (GDP) growth rate results earlier in the week.

However, the Swedish Krona’s losses may have been slowed slightly by the week’s other better than expected Swedish data.

This morning saw the publication of Sweden’s December industrial production results, which beat forecasts quite considerably.

Still, with Riksbank’s February policy decision expected next Tuesday, Swedish Krona investors are hesitant to buy the Krona for the time being.

GBP/SEK Exchange Rate Forecast: Central Bank and Coronavirus Developments to Drive Movement

The Pound to Swedish Krona exchange rate is likely to sustain this week’s gains, as there are no other major events expected until next week.

Optimism over Britain’s coronavirus vaccine rollout could keep the Pound gaining, and the Swedish Krona is unlikely to strengthen much as investors await Tuesday’s Riksbank policy decision.

Markets are anxious that the Riksbank could continue to express concern over the value of the Swedish Krona, or follow up its recent foreign exchange shift with another surprise.

On the other hand, if the Riksbank is more optimistic than expected during next week’s policy decision, the Swedish Krona’s movement could finally start to calm.

In fact, strong Swedish data means that the Krona could recover under more good news.

Next week’s economic calendar is looking a little quieter, but UK trade, production and growth rate data due at the end of the week could still influence the Pound to Swedish Krona (GBP/SEK) exchange rate.
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