The news that the Sweden central bank Riksbank is eager to abandon it negative interest policy has failed to initiate a strong response from the GBP/SEK exchange rate. The Swedish Krona only marginally strengthened against the British Pound after the Riksbank pointed a rate hike as early as December.
The Riksbank has maintained its negative interest rate policy since 2015, when it was lowered for the first time in history below zero. The interest rate in Sweden has remained unaltered since December 2018, when Riksbank raised it from an historic low of -0.50% up to -0.25%. The rate hike was in line with the inflation trajectory which was close to the targeted 2%.
During the last trading week the GBP/SEK exchange rate has fallen to a low of 12.3240, but the weekly close was slightly higher at 12.4183 and it’s currently quoted around 12.4203.
The biggest takeaway from the last week monetary policy decision is that the policymakers have left the door open for the rates to fall back below zero if the economic outlook worsens. Governor Stefan Ingves said in the press conference that Sweden economy can soften further due to mainly two factors: weakness in the labour market and global trade factors.
From the other side of the monetary policy spectrum, it appears that we still don’t know yet whether or not the EU will grant the UK a third extension beyond the deadline October 31. The UK Prime Minister Boris Johnson is expected this week to call an early general election. With only four days left to go until the official departure date we should expect these uncertainties to trigger some volatility across the British Pound crosses.
GBP/SEK Technical Pattern
GBP/SEK exchange rate remains trapped in an overextended and nervous trading range. Traders should keep an eye on the previous week low established at the 12.3240 for a possible support area; while on the upside traders should keep an eye on the key intraday resistance level 12.5350 for early signs of another break higher.