The Pound Norwegian Krone (GBP NOK) exchange rate jumped to a new three-week high in the early hours of this morning, but will an unfavourable election result weigh on Sterling?
Norwegian (NOK) Krone Retreats following Rout in Oil Prices
The Norwegian Krone was weakened this morning as concerns over a supply glut caused oil prices to nosedive over the last couple of sessions.
Oil flopped yesterday following an unexpected rise in US crude stockpiles as data showed that Shale inventories expanded by 3.3m barrels last week, up from a 6.4m barrel decline the week before and surpassing forecasts that stocks would contract again.
Adding to the commodity’s woes was the news that Nigeria’s crude production was now back at peak levels for the first time in 16 months after Royal Dutch Shell announced that exports of Forcados crude would resume, pushing more oil into an already over saturated market.
These events have confounded the Organization of the Petroleum Exporting Countries (OPEC) attempts to reduce the global supply glut and prop up prices of oil by agreeing to extend its production cuts into 2018.
With Norway’s economy so closely tied to oil any downturn in crude prices will inevitability lead to a drop in the Norwegian Krone.
Pound (GBP) Subdued as Markets Await Election Results
The Pound slipped from its best levels by the afternoon however, with markets becoming increasingly skittish as the UK heads to the polls to vote for the next government.
With Brexit negotiations set to officially get underway by the end of the month, the next government will be given the task of navigating the UK’s split from the EU, a process likely to be long and difficult.
To that end markets fear that anything other than a greater majority for the Conservatives is likely to damage the UK’s prospects in negotiations as a weakened or even split government would not be able to put up an effective front in talks.
Despite recent polls suggesting that a Tory majority is likely, investors remain cautious especially after the surprise upset of Brexit. As Joshua Mahony, market analyst at IG explained;
‘Amid a remarkable Corbyn resurgence in the polls, traders would do well to remember the confusion caused around the US election and EU referendum, where the predicted demise of stocks in the eventuality of a Trump win or Brexit really didn’t come to fruition, catching many off-guard.’
‘Ultimately the worst eventuality here would be a hung parliament, given that Brexit negotiations are due to start in just 11 days.’
GBP NOK Forecast: UK Election Result Due Tomorrow
Investors will be bracing for the result of the UK election tomorrow morning, with the direction of the GBP NOK exchange rate likely to be closely tied to the outcome.
A greater majority for the Tories will could lead to a surge in the Pound as it raises hopes that Theresa May will be able to pursue her plans for the hard Brexit with the backing of a mandate from the British public.
Meanwhile, the Norwegian Krone may soften tomorrow if domestic data shows a slight drop in Norway’s inflation rate, with economists predicting that it will slide from 2.2% to 2.1% in May.