Pound (GBP) Exchange Rates Soar as EU Parliament Moves to Offer UK Privileged Access to Single Market
The Pound Swedish Krona (GBP/SEK) exchange rate rocketed on Tuesday, bolstered by news that the European Parliament is preparing to negotiate privileged single market access for the UK after Brexit has occurred.
According to a source close to Guy Verhofstadt, the European Parliament is in the process of constructing a 60-paragraph document that will surmise its desire for an ‘association agreement’ with Britain – a surprising shift in sentiment by the EU given their recent insistences that the UK cannot ‘cherry-pick’ and that it must choose either a Canadian style trade deal or a Norwegian one.
The source stated:
‘It is correct that members are working on a resolution proposal for the framework of future relations with the UK likely to be debated and voted during the March plenary session’.
This announcement is pertinent in that it is effectively a massive reassurance for UK and EU businesses, with many having spent the time since the triggering of article 50 entirely unsure of how to factor in UK-EU and EU-UK trade plans and investments.
Furthermore, the possibility of a new framework for cooperation has also renewed hope that other compromises will be made by the bloc on the transition front – which markets hope will soon reach a conclusion.
Swedish Consumer Prices Slip – Swedish Krona (SEK) Exchange Rates Tumble
Swedish inflation unexpectedly dropped in January, exacerbating doubts that the central bank will be able to carry out its plans to start unwinding its monetary stimulus later this year.
The headline consumer price index (CPI) figure printed at 1.6% in January, down from the previous period’s 1.7% and the consensus of 1.8%.
The month-on-month figure similarly disappointed, contracting massively to -0.8%, down from the previous period’s 0.4% and the market forecast of -0.5%.
This news, combined with the recent disappointing gross domestic product (GDP) figures has now led many analysts to dismiss the possibility of a hawkish move from the Riksbank this year.
Indeed, Andreas Wallstrom, Analyst at Nordea Bank AB echoed this sentiment:
‘In our view this, coupled with lower GDP growth and continued uncertainty related to the housing market, will keep the Riksbank side-lined throughout 2018’.
This outlook was also exacerbated by the slightly dovish language of Policymakers in Stockholm last week and the bank’s lowering of its inflation forecast amid the recent slowdown in service prices.
Pound Swedish Krona (GBP/SEK) Exchange Rate Forecast: UK Wage Growth in the Spotlight
The Pound Swedish Krona (GBP/SEK) exchange rate could encounter some pressure tomorrow on the release of the UK’s wage growth readings, with the Bank of England (BoE) expected to assess the readings to see if an earlier-than-expected rate hike is warranted.
Markets currently expect average weekly earnings in the UK to hold at 2.5% year-on-year in December, but any reading above this could reveal that the UK’s tightening labour market has finally had a positive effect on wages.
This could prove one of the final pieces of the puzzle for a May rate hike from the BoE, (with the remaining piece being demonstrable progress in Brexit negotiations) an event could propel the GBP/SEK exchange rate even higher.