The Swedish Krona trended lower versus the pound for the fourth straight session after the Riksbank kept monetary policy unchanged. The pound Swedish krona exchange rate advanced 0.1% to close on Wednesday at 12.4836. The Swedish Krona is edging lower once again as trading kicks off on Thursday.

Swedish Krona

The Swedish Krona drifted lower in the previous session after the Swedish central bank, the Riksbank, signalled a pause in monetary policy. The central bank hiked the repo rate out of negative territory in December but have kept rates on hold in the first meeting of 2020. Furthermore, the Riksbank signalled a prolonged pause, with rates expected to be on hold now until 2023.

There are of course risks to the Swedish economy. The most obvious and near-term risk is coronavirus. The Riksbank were more vocal over the risks associated to the spread of the virus that other central bankers have been this week given that Sweden is particularly exposed to supply chain disruption.

Additionally, the inflation outlook remains rather bleak, owing to lower energy prices. Although policymakers are predicting an uptick in wages over the coming year.

The Riksbank indicated that a rate cut or a rate hike look to be a fairly long way off. As a result, there was little for Swedish Krona investors to get excited about. Furthermore, with a rate hike so far off, the Swedish Krona is not considered an attractive currency particularly versus its peer the Norwegian Krona which is currently experiencing higher inflation.

Pound

The pound is trading with a positive bias as investors continued digesting Boris Johnson’s spending plans and despite heightened rhetoric between the UK and EU officials.

Even though Brexit trade deal negotiations won’t be starting until March both sides are making their positions clear. Yesterday the European Parliament approved a tough opening position for talks with the EU.

The UK will be expected to follow EU policies in a host of areas in exchange for an ambitious free trade deal. The EU language has toughened considerably and whilst the pound was able to move higher, such fighting talk will increase fears of no trade deal being reached and is expected to limit any upside for sterling across the coming months.


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