AI tide rising "forex ripples" British and Swiss currencies are expected to ride the wind and waves.

The AI investment boom is now making its first impact on the European forex market, with analysts believing that the Swedish krona and British pound are expected to be the biggest beneficiaries. Despite the forex market having a daily trading volume of up to $10 trillion this year, it has been largely influenced by the weakness of the US dollar, stemming from trade policy concerns and expectations of rate cuts in the US. However, a closer look reveals that the AI wave driving stock market highs is now causing ripples in the exchange rate market. According to analysis by J.P. Morgan, the recent resilience of the Swedish krona and British pound is partly due to tech-driven investments. In the AI investment evaluation system, Sweden and the UK have shown outstanding performance, and both countries' currencies are gaining momentum, albeit still weakly. According to the Stanford University AI Index, the UK and Sweden attracted over $4 billion in private AI investments last year, ranking third and fourth on the beneficiary countries list, after the US and China. Since the beginning of the year, amidst the weakening US dollar, the Swedish krona has emerged as the strongest performing major European currency, with a rise of nearly 15%, while the British pound has risen by 7%. However, analysts emphasize that accurately quantifying the impact of AI on exchange rate fluctuations remains challenging, given the presence of other factors such as interest rate expectations and fiscal concerns (which have a particularly noticeable impact on the British pound). Jane Foley, Head of Forex Strategy at Rabobank, pointed out: "There have been numerous AI investment plans announced for these two countries. These foreign investments could undoubtedly boost demand for the British pound and Swedish krona respectively, enhancing the resilience of both currencies." The Swedish krona is on the rise against the euro and other Nordic currencies. However, due to fiscal concerns, the British pound has seen a decline against the euro and Swiss franc. Foley further explained that investments in Swedish AI companies will increase the demand for the Swedish krona, leading to a significant rise in the exchange rate; however, the impact on the British pound is less significant due to its already large trading volume. According to data from the Bank for International Settlements, the British pound accounts for just over 10% of global transactions, making it the fourth-largest trading currency in the world, while the Swedish krona accounts for less than 2%. Major investment commitments Last month, the UK and US reached a technology cooperation agreement, with leading US companies such as Microsoft Corporation committing to invest 31 billion (approximately $42 billion) in the UK. AI giants like NVIDIA Corporation plan to provide their data center platforms to Swedish companies such as Telefonaktiebolaget LM Ericsson, Astrazeneca PLC, and others. Microsoft, Meta, Alphabet Inc., as well as Canada's Brookfield Asset Management, also plan to build data centers in Sweden, primarily due to the country's stable power supply and infrastructure. Analysts believe that it is too early to determine the impact of AI on economic growth or unemployment rates these effects may exacerbate public finance pressures in the future, but the related investment commitments have provided a favorable environment for the Swedish krona and British pound. A report released earlier this year by Nordea Bank, a Nordic bank based in Sweden, showed that in a survey of major participants in the Swedish forex market, their net long positions in the Swedish krona had reached near-record highs. Kenneth Broux, Head of Forex and Interest Rate Research at Industrial Bank of France, said that US investments in the tech sector are helping to alleviate market pessimism about the UK's November budget (expected to include tax hikes), thus boosting the attractiveness of the British pound. The latest data from the US Commodity Futures Trading Commission shows that investors have a neutral position on the British pound, neither heavily bullish nor bearish. Speculators' bullish positions on the US dollar against the British pound have dropped from a near three-year high of $3.3 billion in August to just $165 million, indicating weakening confidence in the US dollar's continued appreciation against the British pound. However, Broux said: "What AI could change is the outlook for productivity growth, which has always been the Achilles' heel of the UK economy." He added that the aging population in the West creates opportunities for "reskilling and upskilling," which can help control welfare expenditure and unemployment benefits growth that may result from AI development. Some institutions have an overall optimistic view of the British pound. Investment firm St. James's Place maintains an overweight stance on the pound; Deutsche Bank expects the pound to rise to 1.45 against the dollar in the coming years, compared to around 1.34 currently. Willem Sels, Global Chief Investment Officer at HSBC Private Banking, noted that while he is not optimistic about the short-term outlook of the pound in light of the upcoming budget, he has observed that investors' sentiment towards the UK is more constructively positive than it seems on the surface. Sels said: "One reason is that people see the UK as one of the ideal destinations for AI-related investments." "This is why we saw (NVIDIA Corporation CEO) Jensen Huang sitting side by side with Prime Minister Keir Starmer earlier this year, discussing the advantages of UK development."