The Pound Sterling to Swedish Krona (GBP/SEK) exchange rate fell sharply on Tuesday as inflation data out of Sweden and the UK supported the Krona and weakened the Pound.
Pressure on Riksbank eases
The Swedish currency rallied strongly against many of its major peers as data released by the Swedish Statistics agency showed that the nation’s consumer price index (CPI) fell less than forecast in December.
The currency strengthened as the better than expected figure eases expectations that the Riksbank will introduce further monetary easing measures at next month policy meeting.
According to the data, the CPI fell by 0.3% on a year on year basis, a smaller decline than the 0.6% forecast by most economists.
Against the Euro, the Swedish Krona rallied from a 4-1/2 year low to trade in the region of 0.1060. The currency also regained some ground against the US Dollar and surged by more than 1% against the broadly weakened Pound Sterling.
UK Inflation at Record Low
The Pound Sterling meanwhile weakened sharply against all of its most traded peers after data released by the London based Office for National Statistics showed that UK inflation fell to a record low of 0.5% on an annual basis in December.
The CPI rate is now more than 1% away from the Bank of England’s target of 2% and caused investors to raise their bets that the Bank of England will now delay raising interest rates until 2016.
‘December UK CPI fell to 0.5% yoy, much more than expected, and compounding expectations for an imminent drop into negative territory. US CPI figures will be released this Friday, and I expect them to surprise to the downside. Rate rises in the UK and the US should not now be expected in 2015,’ said a senior market analyst at Saxo Bank.
With oil prices set to continue, their decline UK inflation is likely to weaken further over the coming months. Some economists are forecasting that inflation could slide to a new record low of around 0.2% in February.
The Pound Sterling to Swedish Krona exchange rate was trading in the region of 12.0610
