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Pound Swedish Krona (GBP/SEK) Exchange Rate Steady as Swedish Inflation Falls Below Riksbank’s 2% Target

GBP/SEK Exchange Rate Rangebound, Swedish Inflation Confirms Forecasts

The Pound Swedish Krona (GBP/SEK) exchange rate held steady this morning, with the pairing currently trading around 12.323kr after December’s month-on-month Swedish inflation figure confirmed forecasts and rose from 0.1% to 0.4%.

Sweden’s year-on-year inflation figure also remained unchanged at 1.8%, confirming expectations and upward pressure from oil and gasoline prices continue to prop up the Swedish economy.

Petr Krpata, Chief IR Strategist at ING, commented:

‘[W]ith all three major readings remaining below the 2% target. This, coupled with slowing economic activity, means the Riksbank is unlikely to follow up its December rate hike and the central bank should stay on hold throughout 2020.’

Meanwhile, market optimism is due to increase today ahead of the long-awaited signing of the US-China ‘phase one’ trade deal.

The Swedish Krona (SEK) is noted for its correlation to trade sentiment, and could likely begin to rise against the Pound (GBP) once the two superpowers officially sign the deal.

Ipek Ozkardeskaya, a Senior Analyst at Swissquote Bank, recommended caution, however, commenting:

‘The Trump administration revealed a detail that nobody expected just before the signature of the phase-one trade deal today: the tariff cuts will not take effect before the US election in November.

‘The risk here is that the double-standard agreement could provide a weak basis for the future negotiations, impair the benefits, or even spoil the deal.’

GBP/SEK Exchange Rate Steady, UK Inflation Falls Below Bank of England’s Expectations

The Pound (GBP) failed to gain on the Swedish Krona (SEK) today after December’s UK inflation figure undershot forecasts and eased from 1.5% to 1.3% – a three-year low.  

The report has left UK markets feeling jittery as this provides further evidence for the Bank of England (BoE) to slash its interest rates in the near-term.

This also follows news that BoE policymaker Michael Saunders has repeated his calls for a rate cut. Mr Saunders commented:

‘It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the 2% inflation target.

‘With limited monetary policy space, risk management considerations favour a relatively prompt and aggressive response to downside risks at present.’

Brexit continues to remain in focus for Pound traders today, with continuing concerns over the lack of clarity on a UK-EU free trade deal post-31st January dampening market sentiment in GBP.

GBP/SEK Outlook: Could the Swedish Krona Sink on a US-China Trade Deal Fallout?

Pound (GBP) investors will be looking ahead to tomorrow’s release of the Bank of England’s Credit Conditions Survey for the fourth quarter. Any signs of instability in the British economy would prove GBP-negative as this would further confirm fears of a rate cut from the central bank.

US-China trade developments will drive the GBP/SEK exchange rate this week, with any signs of a fallout between the world’s two largest economies having a negative impact on the global trade-reliant Swedish Krona.