GBP/SEK is starting the Thursday session on a positive note, after declining by 0.67% yesterday. Currently, the pair is trading at 12.6514, up 0.08% as of 6:36 AM UTC.
Despite the Tuesday rally, when the price surged over 0.90%, the pair is likely to end the week lower if the uptrend doesn’t continue, as bears have been dominant.
SEK under pressure amid slow inflation
The Swedish Krona is declining against an already weakened pound after Statistics Sweden said yesterday that consumer price index (CPI) slowed to the lowest in 34 months in January. Inflation rose 1.3% year-on-year last month, after a 1.8% increase in December, while economists expected a 1.7% rise.
In monthly terms, consumer prices fell 1.4% in January, following a 0.4% increase in December. This was the first drop in five months.
The CPI with fixed interest rate (CPIF) increased 1.2% year-on-year last month, after a growth of 1.7% in December. In monthly terms, the indicator fell 1.5% after a 0.4% increase in December.
Thus, recent data suggests that the Swedish economy might be facing a deterioration, which should prompt the central bank to consider further easing. However, the Riksbank wouldn’t be happy to return to negative interest rates, so it will probably ignore any signs of short-term struggles.
However, despite the subdued inflation data, Krona actually rallied yesterday against the pound, as the latter couldn’t make anything out of generally positive inflation and labor market data. Investors were worried that the surge in inflation was only a temporary effect of the December election and that the UK economy was about to show its troubles later this year.
Earlier today, XpertHR said that UK employers had offered workers the lowest annual pay awards in over a year during the three months to January. The median annual pay growth declined to 2.1% from 2.2% in the previous three months, which is the lowest since the end of 2018.
XpertHR analyst Sheila Attwood commented:
“With January generally setting the tone for much of the rest of the year, we now expect employers to continue to exercise caution when making their pay awards, and for low pay awards to prevail over the coming months.”