GBP/SEK: Pound Pares Gains As UK Prepares For Coronavirus Pandemic

The Pound (GBP) drove higher versus the Swedish Krona (SEK) at the start of the new trading week, extending gains for a fourth straight session. Despite falling 1.3% at the start of last week, the pound clawed back some of those losses across the latter part of the week, ending at 12.2536 just -0.4% lower than it started the week.

Across the Asian session overnight the Pound advanced to 12.3222. However, at 07:00 UTC, GBP/SEK is paring those gains trading flat at 12.2493.

BoE Keeps Pound Underpinned

Coronavirus is in full focus as the week begins, in risk off trading. The number of cases worldwide is over 100,00 and the number of cases in Britain experienced its biggest daily jump on Sunday with over 273 confirmed cases.

Last week, as the number of people infected rose, the financial markets plunged and the Federal Reserve stepped in, slashing rates by 50 basis points to shore up the economy from the potential impact of coronavirus on economic growth.

Investors’ assumed that the Bank of England would follow in the Fed’s footsteps, sending the pound sharply lower. However, comments from incoming BoE Governor Andrew Bailey calmed those fears. Andrew Bailey said that he would like to see what the Chancellor offers in the Budget and wait for further data before taking any rate cutting decisions. The more relaxed attitude of the central bank lifted the pound.

In addition to coronavirus and the Budget, Brexit headlines could cap gains in sterling. Chief EU negotiator Michel Barnier said that there will be difficulties to reach an agreement by the end of the transition period.

Swedish Krona Dips On Rate Cut Speculation

The Swedish Krona is under pressure as investors consider the likelihood of the Riksbank cutting interest rates The Swedish Riksbank is closely following developments related to the global coronavirus outbreak. Deputy Governor Henry Ohlsson said that the Riksbank would be ready to take rapid action if necessary. Investors are starting to suspect that he Swedish central bank could be forced to cut rates just months after bringing rates out of negative territory for the first time in five years.

The next central bank meeting is not until 28^th April. However, Henry Ohlsson hinted that the bank could act sooner if deemed necessary. The fact that inflation also fell -1.4% month on month in February also has market participants questioning whether the Riksbank lifted rates prematurely.

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