The Norwegian Krone firmed by more than 0.30% against Pound Sterling on Monday despite the release of weaker than forecast Manufacturing Purchasing Managers Index (PMI) data and another decline in oil prices.
The GBP/NOK exchange rate hit a session low of 11.774
Earlier in the session, the Norse currency weakened as domestic data showed that manufacturing activity growth slowed in February after quickening in January. According to the Norwegian Association of Purchasing and Logistics (NIMA) and Danske Bank, the nation’s manufacturing PMI fell to a reading of 51.2 in February, down from the 51.9 figure seen in January. The report showed that the production sub index decreased 52.2 from 54.4. Employment levels contracted at a faster rate than expected as the index fell to 46.5 from 47.2. In a PMI, a number above 50 indicates expansion, whilst a number below indicates contraction.
The Pound, meanwhile, received support from better than forecast UK manufacturing PMI data. The report compiled by Markit/CIPS showed that activity in the sector grew by its best pace in seven months in February. The PMI rose to a reading of 54.1 in February, higher than economists’ forecast.
A sub index for factory gate prices fell at its fastest pace since September 2009, while prices paid by manufacturers for raw materials and energy continued to fall sharply, albeit at a slightly slower pace than in January.
‘The UK manufacturing sector is reviving in early 2015 after the slowdown seen late last year, as growth rates of both production and new orders continued to strengthen in February. Output is now rising at a quarterly pace close to 0.5% and job creation is running at a rate of five thousand new positions filled per month. This reinforces the picture of a broader growth revival in the UK so far in the opening quarter,’ said Rob Dobson, senior economist at Markit.
As the session progressed, the Pound began to soften against the Norwegian Krone and other currencies as investors raised their bets that the Bank of England (BoE) will leave interest rates unchanged as long as inflation remains at record low levels.
The Norwegian Krone’s gains could be supported by events in the Middle East. With the Iraqi government, launching an offensive against the Islamic State, the nation’s oil supplies could be affected by the fighting. A disruption in supply is likely to reduce stores and therefore increase oil prices, something that will aid the Norwegian currency.