The Norwegian Krone enjoyed an uptrend versus Pound Sterling as oil prices firmed on account of tensions in the Middle East and increased global demand. The week ahead could see some interesting Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate movement, with the release of highly influential UK and Norwegian data.
Thursday’s Norwegian Unemployment Rate stat could cause a major depreciation in the Krone if economists are correct in forecasting an increase from 4.1% to 4.3% in March. Between the years of 1997 and 2015, joblessness in Norway averaged at 3.45%. However, since 2014, the Unemployment Rate has climbed from 3.7% to 4.1% and looks set to continue its upward trend in the near future. More citizens have been made redundant as jobs in the oil and gas sector dry up with the recent near 50% decline in oil prices. Economist Kjersti Haugland commented: ‘We have seen the brakes being applied in other numbers tied to the oil sector, and have been surprised that this worsening hasn’t shown up in unemployment statistics earlier. Now it is.’
A silver lining for Norway’s future oil industry has come in the form of oil prices stabilising at around $60 a barrel in May. Between March and the middle of May, Brent crude oil rallied by over 25% and has been able to maintain most of those gains since. However, many economists are suggesting that the recent oil appreciation cycle is running out of steam and the strong US Dollar (USD) could be problematic for further oil gains.
Representatives at Timera Energy stated: ‘The fact that WTI prices are approaching LRMC (long-run marginal cost) benchmarks for new investment suggests to us that the recent rally in oil prices may not have much farther to run. If this is correct, then the US Dollar is likely to provide a useful indicator as to the next move lower in crude prices. If the US Dollar resumes its climb then oil prices will likely face strong headwinds.’
Additionally, Friday’s Norwegian Retail Sales stat could also have an influence on Krone exchange rate movement. Economists have predicted a decline from 6.71% to 3.53% on the year in April, which could be another event to pressure the Norwegian Krone lower. Meanwhile, the Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate could jump on Thursday if the UK’s Gross Domestic Product (GDP) stat climbs from 2.4% to 2.5% in Q1 year-on-year, as economists have forecast. The early hours of Friday morning could also encourage the Pound higher in the European session with the release of the UK’s GfK Consumer Confidence Survey for May. The index is expected to remain at 4, but any favourable increase could allow the Pound to gain. The Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate is currently trending in the region of 11.8401.