The prospect of a bolder UK fiscal policy sent the pound rallying versus the Swedish Krona in the previous session. The pound Swedish Krona exchange rate jumped 1.2% to a weekly high of 12.6495. The pound is extending those gains in early trade on Friday.
Across the week so far the pound has appreciated 1.4% versus the Swedish Krona, paring some of the 2% loss that it experienced in the first week of February.
Boris Johnson’s cabinet shakeup has seen the surprise resignation of the Chancellor of the Exchequer Sajid Javid. The pound rallied sharply, after Sajid Javid’s resignation as investors bet that his placement Rishi Sunak will pave the way for a more expansionary budget next month.
There has been a rift between Boris Johnson and Sajid Javid for some time, Javid was more conservative on fiscal policy. Boris Johnson has made no secret of his plans for large scale spending. Sunak, an ex-hedge fund manager is considered more pro- business, more under control and malleable than Javid, increasing the likelihood of a high spending budget next month.
With increased fiscal spending, the Bank of England will be less inclined to consider cutting interest rates, which is supportive of the pound. Investors will now look eagerly ahead to March’s budget, where expectations are for large scale spending to boost the UK economy through Brexit.
The Swedish Krona has been on the back foot across the week that the Riksbank, the Swedish central bank, kept interest rates on hold. After raising interest rates out of negative territory for the first time in 5 years in December, the Swedish central bank acted as expected and kept policy unchanged. However, the Riksbank also predicted that rates would remain on hold in the coming years.
There is no high impacting Swedish economic data due today. Investors will be looking across at German GDP data. German is one of Sweden’s largest trading partners for exports. Any signs of slowing economic growth in Germany could have a knock-on effect on the Swedish economy, hitting the value of the Swedish Krona.
Looking ahead to next week, Monday sees the release of industrial inventory data and unemployment data is due on Tuesday.