After rising sharply against the Norwegian Krone last week, the Pound has since dropped on growing political concerns.
ound Slips on Worries of ‘Boris v May’ Clash
On a slow day for UK economic data, the Pound has tumbled against the Krone over political concerns.
The main issue has been that Foreign Secretary Boris Johnson has once again put forth the controversial claim that the UK could be £350m per week better off after Brexit.
This is the gross amount the UK pays to the EU each week, which Johnson claims could be better spent on the NHS. However, he has been criticised for using this, rather than the net figure, which takes into account the rebate received by the UK government.
Johnson’s timing has also brought difficult questions to the fore.
The source article in the Daily Telegraph has come just one week ahead of a major Brexit speech from Theresa May, which could undermine the PM’s message.
The main uncertainty is whether Johnson is planning to launch a takeover bid on the Conservative leadership – something he has previously denied.
Norwegian Krone Advances after Closely-Fought Election
In the wake of a very tightly contested Norwegian general election, the Norwegian Krone has shaken off uncertainties and risen sharply against the Pound.
The election was held on September 11th and saw the Conservative party cling to power through a coalition with Progress, along with support from the Liberal and Christian Democratic parties.
Starting the new parliament off on a cautious note, returning Prime Minister Erna Solberg has warned that income from oil may fall in the future.
While oil has long been a supporting pillar of the Norwegian economy, Solberg’s warning comes ahead of potential difficulties as the industry faces tough opposition from environmental groups.
GBP/NOK Forecast Theresa May Speech to Create Pound Volatility
This week, Pound/Norwegian Krone exchange rate movement may occur on a Bank of England (BoE) official’s speech on Tuesday, UK retail sales stats on Wednesday and a speech from the Prime Minister on Friday.
Tuesday afternoon will bring a speech from BoE policymaker Donald Kohn, a long-time member of the Financial Policy Committee (FPC).
Should Kohn suggest that the financial system is under pressure the Pound could fall, while comments suggesting the risks to the system are abating may help Sterling gain ground.
A more concrete source of influence will be Wednesday’s retail sales results for August. Excluding annual sales without fuel included, expectations are for a slowdown across the board.
The main event of the week will come on Friday. This will be Prime Minister Theresa May’s speech on Brexit, taking place in Florence.
The actual content of the PM’s speech remains a mystery, but some spectators believe that the PM could agree to a provisional EU ‘divorce bill’.
While agreeing to pay billions in parting to the EU might enrage senior Conservatives back in the UK, it could put the PM on a good footing with EU negotiators as Brexit talks continue.
If the PM does say anything genuinely productive during Friday’s meeting, the Pound could appreciate significantly against the Krone.
From Norway, the only notable event will be the Norwegian central bank interest rate decision. At the time of writing, Norges Bank is not predicted change interest rates from their present level of 0.5%.
Some economists believe that Norges Bank officials may express concern about inflation and delay how long they wait before raising interest rates.
Such a course of action could lead to the Norwegian Krone declining slightly against the Pound.