The Norwegian Krone to Pound Sterling (NOK/GBP) exchange rate fell to a session low of 0.0833 as oil prices fell and economic data out of the UK came in better than forecast. Following the UK data release and oil price decline, the NOK/GBP exchange rate weakened by more than 1%.
On Monday oil prices had surged to reach a 7-week high on signs of increased demand for the commodity in Asia and as concerns over Iranian oil flooding the global market eased. Iran is expected to begin selling its oil after a preliminary deal was reached between Tehran and the west over the nation’s nuclear programme. A weaker US Dollar because of disappointing jobs data also lent support to oil prices. Due to the rise in the value of the commodity, the Norwegian Krone and other oil related currencies, such as the Canadian Dollar, made solid gains.
The Norwegian Krone then went onto the retreat in Tuesday’s session as oil prices turned negative. Investors took profits following the strong gains seen in the previous session and attention turned back to US supplies.
‘The gains were not reflective of broad market sentiment, which is why oil is retreating again today – it seems like a correction. I would expect more volatility in the coming days as markets price in the news on the Iranian negotiations and await production numbers due out of the US,’ said Marina Petroleka, chief oil analyst at BMI Research.
Because of the $1 fall in oil prices, the Norwegian Krone weakened against the majority of its most traded peers. Against the Pound however it was further weakened after the release of a better than forecast UK services PMI report.
According to market research group Markit, a surge in new orders sent the Markit/CIPS UK services PMI to a seven month high of 58.9 in March. The figure was better than the 56.7 recorded in the preceding month and was well above the 50 level that divides expansion from contraction.
The UK economy is now forecast to expand by 0.7% in the first quarter of 2015, an improvement on the 0.6% expansion seen in the final quarter of 2014.
A revised report released by the London based Office for National Statistics showed that the UK economy expanded by 2.8% last year, an improvement on an earlier estimate of 2.6%. The figure marks the strongest annual UK economic growth since 2006, when the economy grew by 3%.
The Norwegian Krone is likely to experience further volatility on Friday when the latest domestic inflation and industrial production data is released.
As the European session progressed on Wednesday the Norwegian Krone to Pound Sterling exchange rate was trading in the region of 0.0834.