GBP/SEK is declining on Wednesday after rallying yesterday. Currently, the pair is trading at 12.7010, down 0.16% as of 6:27 AM UTC. Yesterday, the price rose 0.90%, which is the second-highest daily gain year-to-date.
Price Has Overreacted to Sweden’s Labor Data
The pair peaked on Tuesday at 12.7377, which is the highest level since December 2015. Thus, the current decline might be only a temporary correction after investors overreacted to labor market data released by Sweden.
Yesterday, Statistics Sweden said that the country’s unemployment rate surged in January. The seasonally adjusted figure increased to 7.1% compared to December’s reading of 6.6%. Analysts expected an increase of 6.9%. The trend rate remained unchanged at 7%, while the unadjusted rate jumped to 7.5%, which is the highest level in about 12 months.
However, economists warned that investors shouldn’t read too much into the figures. Stefan Mellin of Danske Bank suggested that the update should be taken “with a grain of salt.”
Sweden is about to release inflation data later today, and that might be a bigger focus for investors.
Robin Ahlen at Swedbank noted that Sweden’s labor market data hadn’t been always accurate.
“Thus one should be cautious about over-interpreting individual numbers and rather look at the trend development and a wider palette of data,” he said.
Last year, Sweden’s central bank had criticized the statistics agency after it revised the jobless rate for September by cutting almost 1% from the previous reading, suggesting errors.
Riksbank Deputy Governor Henry Ohlsson said back then:
“What has happened is a catastrophe. Public statistics are the basis for economic, political decision making, and this is a sad story.”
In response, Statistics Sweden blamed a subcontractor for the errors that forced the agency to restate almost all of its data since July 2018.
All in all, Sweden’s economic growth continues to slow. Swedbank still expects the unemployment rate to increase.
Yesterday, the UK also released its labor market data, which helped the sterling extend its gap against the Swedish Krona. The number of people in work surged 180,000 in the three months to December, to 32.934 million, while analysts expected an increase of 145,000.