GBP/SEK Outlook:
The GBP/SEK is slightly weaker, but likely to move sideways. Currently, it is trading below its recent average and within its 3-month range, indicating limited momentum.
Key drivers:
• Rate gap: The Bank of England is focusing on steady rates while the Riksbank is considering rate cuts if inflation continues to decline, which adds pressure on the SEK.
• Risk/commodities: Oil prices remain volatile, which may impact the UK economy and, in turn, the GBP, as the UK is a net importer of oil.
• One macro factor: Sweden’s inflation is expected to fall below target levels, which may prompt further accommodative policy from the Riksbank.
Range:
Expect movement to hold within the current 3-month range as both currencies face similar pressures.
What could change it:
• Upside risk: A significant improvement in UK macroeconomic data could boost the GBP.
• Downside risk: Continued disinflation risks in Sweden could trigger sharper moves against the GBP.