GBP/SEK Recovers Recent Losses, Awaits UK-EU Trade Talks

GBP/SEK is bouncing back on Friday, currently testing a strong resistance level. The pair is trading at 12.6671 right now, up 0.25% as of 6:50 AM UTC.

The trend is still defined by Sweden’s disappointing inflation data published on Wednesday. Elsewhere, the pound enjoys support from retail sales and industrial trends orders data released yesterday.

All Eyes on UK-EU Trade Talks

Investors are focused on the trade negotiations between Britain and the European Union, which should start next month. The two sides have opposing opinions on how to handle the Brexit transition process, after the UK left the bloc on January 31.

Over 66% of economists surveyed by Reuters believe that the deadline of the transition period will not be extended beyond December 2020. While European leaders would like at least two years of talks instead of the current 11 months, UK Prime Minister Boris Johnson ruled out any extension attempt.

Peter Dixon of Commerzbank commented:

“The UK government is unlikely to want to cross what appears to be such a major red line by agreeing an extension. Instead, the government will likely try and secure a narrow trade deal in areas where the UK’s economic interests are best served.”

About 90% of the polled economists said that the most likely future trading format was a free-trade agreement. The likelihood of a no-deal Brexit and trading under World Trade Organization rules came next. The fact that a no-deal outcome was given few chances by the economists bodes well for the British pound.

However, if a deal is reached by the end of this year, it would be narrow and would touch upon the basic aspects only. 21 out of 34 respondents said that the deal would comprise goods only, while 13 believe it would also include the UK’s service industry.

Schroders economists said in a note to clients:

“The UK is likely to prioritise manufacturing sectors, in particular, the auto industry, chemicals and machinery. However, trade in services is likely to be excluded, partly due to the complexity and lack of available time, but also due to the fact that the single market for services remains incomplete.”

Earlier this week, a senior EU advisor stated that the European Union would not give any special treatment to the UK and would determine its access to the single market the same way it has done for the US and Japan.

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