Brexit and Strong Swedish Data Hits GBP to SEK Exchange Rate to Fortnight Worst

February 27, 2020 – Written by James Fuller

After seeing relatively narrow movement for most of the week so far, the British Pound to Swedish Krona (GBP/SEK) exchange rate was knocked yesterday and continued to see notable losses today. The Swedish Krona is benefitting from the Pound’s losses on the latest hard Brexit fears, as today’s Swedish data has been fairly strong.

GBP/SEK tumbled last week and could be on track to see yet another week of losses. After opening this week at the level of 12.59, GBP/SEK saw mixed movement for the first half of the week, briefly edging both higher and lower.

Since yesterday though, GBP/SEK movement has been weaker. GBP/SEK saw even more considerable losses today, and at the time of writing was trending near a low of 12.42. This was the lowest GBP/SEK level in a fortnight – since the beginning of February. Unless the Pound finds fresh supportive news to gain on, the Pound to Swedish Krona exchange rate could continue to weaken.

GBP Exchange Rates Plummet as UK Government Threatens Hard Brexit Once Again

In recent weeks, the Pound has been benefitting from market hopes that Britain’s new Chancellor could use the budget to boost the chances of an economic rebound. Economic data has been strong.

Due to these hopes, as well as hopes that the coronavirus may not hit the UK like other major economies, the Pound had seen fairly strong demand.

However, UK-EU Brexit negotiations are finally beginning next week and are expected to last throughout the year. As the negotiations draw closer, Pound investors are seeing something of a reality check.

Today, as markets become increasingly focused on Brexit again, the UK government has once again taken a tough stance on negotiations. The government indicated that it could cut negotiations short in June, if it does not perceive a favourable deal to be within sight.

This has once again caused fears of a worst-case scenario hard Brexit to rise. If the Brexit transition period ends at the end of the year without any new deal in place, it could cause a cliff-edge scenario for businesses.

On top of this, hopes for more spending in the government’s budget have also faded. This is causing Bank of England (BoE) interest rate cut bets to rise.

According to Marshall Gittler, Head of BDSwiss:

‘No big fiscal push means that if there’s a slump, the burden of reviving the economy will fall on monetary policy,’

SEK Exchange Rates Rebound Thanks to Slew of Strong Swedish Data

The Swedish Krona has been holding its ground for much of the week, before finally gaining strongly today as investors digest the latest Swedish data.

A slew of key Swedish ecostats from February and January has been published today – and a lot of the most notable prints came in higher than forecasters expected.

Sweden’s January trade balance was a stronger than expected 9.9bSEK, and January’s retail sales results significantly came in with stronger than expected 0.9% month-on-month and 2.7% year-on-year.

Topping this off was February confidence data, which also beat forecasts.

February’s business confidence slipped to 97.1, higher than the forecast 96.9. Consumer confidence unexpectedly rose, to 98.2. Last of all, consumer inflation expectations remained at 3.4% rather than slowing to the forecast 3.3%.

The Krona’s strength was slightly limited by some underwhelming Swedish PPI data, but overall the day’s stats were strong enough to give the Swedish Krona a notable boost against the weaker Pound today.

GBP/SEK Exchange Rate Forecast: Key Swedish Growth Report Ahead

This week’s bullish Swedish Krona run could see further gains, if tomorrow’s Swedish growth rate data beats forecasts as well.

Swedish growth is forecast to have slowed to 0.2% quarter-on-quarter and to 0.8% year-on-year in Q4 2019.

If the Q4 growth stats slow less than expected, hopes of Sweden’s economic resilience will persist and the Swedish Krona could see fresh demand. On the other hand, weaker data could have the opposite effect and could cause SEK to shed some of this week’s strong performance.

UK consumer confidence data will be published tomorrow as well, but it is unlikely to be highly influential with Brexit uncertainty returning to headlines.

If the UK government continues to show a tough stance on upcoming Brexit negotiations, hard Brexit fears will persist and the Pound to Swedish Krona exchange rate could continue to see weak performance.

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TAGS: Pound Sterling Forecasts