Pound Sterling Swedish Krona (GBP/SEK) Exchange Rate Edges Higher as Swedish Inflation Tumbles
The Pound Sterling Swedish Krona (GBP/SEK) exchange rate edged around 0.3% higher on Wednesday morning. This left the pairing trading at around 12.0067kr.
Data released this morning revealed that Swedish inflation slumped sharply in April, which dampened the Krona.
Today’s data revealed consumer prices fell -0.3% between March and April, and slumped by an annual rate of -0.4%.
This underlined the extent to which to coronavirus crisis has hit the Swedish economy.
Sweden’s Riksbank targets headline inflation of 2%, and although inflation is far below target, the central bank is unlikely to cut rates which are currently at 0%.
The Riksbank has launched a range of unprecedented measure to help the economy after being hit by the coronavirus crisis.
While forecasts point to the economy shrinking up to -10% this year, the bank argues the crisis is temporary. The bank noted the fall in inflation was the result of lower energy prices.
Pound (GBP) Gains as Government Extends Furlough Scheme
Sterling was able to make gains against a weaker Swedish Krona despite data revealing UK growth plummeted in the first quarter.
However, the Pound edged higher as the British government extended its furlough scheme until the end of October.
Meanwhile, this morning’s data revealed the economy shrank by a record -5.8% in March as the coronavirus hit the country.
Added to this, in the first three months of 2020, growth contracted by -2%. This was the largest quarter-on-quarter fall since the end of 2008.
Analysts also expect the economy to suffer an even larger contraction as the British public spent the month under lockdown.
Commenting on this, head of economics at the British Chambers of Commerce, Suren Thiru said:
‘The speed and scale at which coronavirus has hit the UK economy is unprecedented and means that the Q1 decline is likely to be followed by a further, more historically significant, contraction in economic activity in Q2.’
Pound Swedish Krona Outlook: Will Optimism Buoy GBP?
Looking ahead, the Pound (GBP) could edge higher against the Swedish Krona (SEK) if markets become more optimistic about the UK easing its lockdown.
However, Sterling could suffer losses if traders become increasingly concerned with the high costs associated with the government’s plans to support the economy. This could leave the Pound Swedish Krona (GBP/SEK) exchange rate largely flat.