GBP/SEK: Pound Nudges Higher As SEK Awaits Riksbank

After the sharp selloff in the previous week, the pound attempted to rebound versus the Swedish krona on Monday. The pound Swedish krona exchange rate closed on Monday 0.1% higher at 12.4737 after trading in a tight range.

GBP/SEK is holding steady on Tuesday, consolidating recent losses, as investors look towards a raft of UK data and ahead to Wednesday’s Riksbank’s interest rate decision.

Pound

The pound managed to push no trade deal Brexit fears aside in the previous session to focus on Boris Johnson’s infrastructure spending plans. Over the weekend the prime minister gave the go-ahed to HS2, the high-speed train line set to link Northern England. On Monday, Boris was also talking of a bridge to connect Northern Ireland to Scotland. High levels of fiscal spending can boost a currency.

Today attention will be squarely back on the UK economic calendar with a raft of releases expected. Industrial production and manufacturing data are expected to show that the slump in the sector is easing. Whilst month on month declines are forecast, the rate of decline is expected to have slowed.

GDP data will also be closely monitored. Analysts are forecasting quarter on quarter growth of 0%, in the fourth quarter preliminary reading. Whilst consumer spending was solid, this is expected to have been offset by weaker foreign trade and inventories.

Swedish Krona

With no other data to digest, the Swedish Krona is in a holding pattern prior to Wednesday’s Riksbank announcement.

Recent Swedish macros data has been encouraging. Even so this is unlikely to result in another move by the Ribsbank, which raised interest rates 25 basis points in December, ending 5 years of negative overnight repo rates. The central bank is now firmly in wait and see mode after growing increasingly concerned over the long-term effect that negative interest rates could have on the economy.

Inflation in Sweden is currently at 1.3%, well below the central bank’s 2% target. Analysts expect this could fall soon, owing to declining electricity and energy prices. Electricity is around half the price that it was a year ago, thanks in part to higher than usual temperatures providing good conditions for hydro power, which represents 40% of the country’s electricity production.

As a result of lower inflation expectations, the Riksbank are not expected to adjust monetary policy this month or indeed across the rest of the year.

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