GBP/SEK Exchange Rate Falls on Dovish BoE Statement
The Pound to Swedish Krona (GBP/SEK) exchange rate plummeted by -0.9% today, with the pairing currently fluctuating around 12.207kr as the odds of a Bank of England (BoE) rate cut continues to increase amid rising coronavirus fears.
The central bank’s spokesman commented:
‘The Bank is working closely with HM Treasury and the FCA [Financial Conduct Authority] – as well as our international partners – to ensure all necessary steps are taken to protect financial and monetary stability.’
Today’s release of February’s Markit Manufacturing PMI, which fell below forecasts from 51.9 to 51.7, also failed to buoy the GBP/SEK exchange rate due to rising concerns that the Covid-19 crisis could further weigh on the UK’s currently fragile economy.
Rob Dobson, Director at HIS Markit, was also downbeat in his analysis:
‘[T]he upturn remains confined to the consumer and intermediate goods sectors, as the downturn at investment goods producers continued. This suggests that business confidence levels have yet to recover sufficiently to support a sustained rise in capital spending. With supply-chain headwinds rising, and trade negotiations with the EU starting, it remains to be seen whether the recovery can stay on course during the coming months.’
With the UK economy expected to take a downturn in the near-term, Sterling traders are becoming increasingly concerned that the BoE could cut its interest rates to prevent potential shock from the coronavirus and a possible no-deal Brexit.
SEK/GBP Exchange Rate Rises as Swedish Manufacturing Rises in February
The Swedish Krona (SEK) rose against the weakened Pound (GBP) following today’s release of Sweden’s Manufacturing PMI, which rose from 52 to 53.2 and boosted optimism in the economy.
However, due to Sweden’s export-oriented economy, the Swedish Krona’s gains may be short-lived as fears continue to grow over the coronavirus’s (Covid-19) negative impact on the global economy.
Sweden’s Riksbank Governor Stefan Ingves also expressed concern over Covid-19’s likely spread and its possible impact on Sweden’s economy:
‘There is genuine uncertainty and we have to deal with the uncertainty at the pace we get more clarity on what direction the economy is heading.’
GBP/SEK Outlook: Sterling Could Sink on Rising BoE Rate Cut Odds
Swedish Krona (SEK) traders will be looking ahead to Thursday’s release of Sweden’s new orders manufacturing data for January. However as this is expected to sink by -0.8%, we could see SEK begin to lose some of its gains on the Pound.
Thursday will also see the release of Sweden’s industrial production value report for January. Any signs of improvement could buoy the Swedish Krona on renewed hopes for Sweden’s industrial sector.
The Pound (GBP) will continue to be driven by coronavirus developments. Any further signs that this could have a negative impact on the British economy would elevate the odds of a BoE rate cut and weaken Sterling.
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TAGS: Pound Sterling Forecasts