Bias: bearish-to-range-bound, as GBP is below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Bank of England has signaled a cautious approach to rate cuts, which contrasts with Sweden's stable policy rate of 1.75% set by the Riksbank.
- Risk/commodities: Oil prices have been volatile recently, affecting the GBP as increased prices can negatively impact the UK economy while benefiting Sweden's oil-linked economic fundamentals.
- Macro factor: Economic growth projections indicate that the UK's GDP growth is expected to slow, which may weigh further on the GBP.
Range: The GBP/SEK pair will likely hold within its recent 3-month range, showing limited upward or downward movement due to mixed signals.
What could change it:
- Upside risk: Stronger-than-expected economic data from the UK could boost the pound.
- Downside risk: Renewed geopolitical tensions could increase demand for safe-haven assets, impacting GBP negatively.