Today at 06:45 UTC, GBP/SEK is extending gains trading -0.1% at 11.9970 as investors look ahead to the BoE announcement.
No Rate Cut Expected
Pound investors look ahead of a busy session. Firstly, UK retail sales data is due. However, given that this data is from February, it is already considered out of data. The coronavirus outbreak escalated in March.
Attention instead will shift towards the Bank of England monetary policy announcement later today. This will be Andrew Bailey’s first scheduled meeting as Governor, after taking over from Mark Carney. It is unlikely that Andrew Bailey will cut rates again after rates have already been slashed to a record low 0.1% in an attempt to cushion the blow of the coronavirus on the UK economy.
Investors will be interested to hear Andrew Bailey’s views over how quickly he considers the UK economy can recover or whether further bond buying will be required.
The meeting comes after the initial impacts of coronavirus on the economy was revealed in Parliament on Wednesday. Officials disclosed that half a million people had registered over the past nine days to claim the main welfare benefit, universal credit. This gives an indication of the surge in unemployment which is expected as a result of coronavirus.
Swedish Krona Declines As IMF Warns On Global Recession
The International Monetary Fund (IMF) warned on Wednesday that the looming coronavirus recession will be worse than the global financial crisis of 2009. Sweden’s economy is heavily dependent on exports, making it particularly vulnerable to the health of the global economy. However, the IMF also said that it expected to the economy to recover by 2021.
Separately, the producer price index (PPI) for February, which measures inflation at wholesale level, declined by more than forecast, at -0.6% in February. This was from before the coronavirus outbreak escalated in Sweden and suggests that SEK investors should prepare for an even worse reading in March.
Investors are growing increasingly concerned over the Swedish government’s approach to coronavirus, which is notably more relaxed than elsewhere in Europe. Should cases escalate quickly, the Swedish economy could be in worse shape for longer.