GBP/SEK: Pound Pares Losses Despite No Trade Deal Brexit Fears

The pound was on the rise on Tuesday after slipping lower versus the Swedish krona at the start of the week. GBP/SEK declined 0.3% closing Monday’s session at 12.5841.

The pound is attempting to pare some of those losses in early trade on Tuesday; however, with Brexit talks set to start next week, demand for the pound could be limited.

Brexit in focus

No deal Brexit fears are back and weighing on sterling. Brexit trade talks set to begin next week; however, investors are growing increasingly concerned that the two sides will fail to agree a deal. Both the EU and UK have been hardening their stance in recent week. France warned that they will not be pushed into a bad trade deal because of an inflexible British deadline. Meanwhile UK Prime Minister Boris Johnson has insisted that the transition period cannot be extended beyond the 31^st December, regardless as to whether a deal has been agreed or not.

Today the UK economic calendar is quiet. There is some mid-tier retail sales data from the Confederation of British Industry. However, this is unlikely to distract investors from the upcoming Brexit talks.

Swedish Krona Looks To Spread of Coronavirus

The Swedish Krona reacted well to German IFO data which, along with better than forecast German PMI’s last week points to a stabilising picture for Europe’s largest economy. The unexpected jump in German IFO data underpinned the Swedish Krona on Monday, even as fears over the rapid spread of coronavirus in Italy picked up.

Sweden is an open economy. As the Riksbank acknowledges, the Swedish economy is vulnerable to supply chain issues stemming from factory closures in China and the slow ramping up again as workers return to work. However, concerns are now much closer to home. Italy is the eurozone’s third largest economy; it also has 4 land borders which could have to be closed or risk the deadly virus spreading. Concerns over the health of the eurozone economy could drag on close trading partner Sweden.

There is no high impacting Swedish data for investors to digest until Thursday when a raft of numbers including business confidence, inflation and trade balance are due.

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