Over the past week, the Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate was trending within the range of 12.5720 to 12.9316.
Commodity-correlated currencies, especially those with close ties to crude oil prices, have generally slumped over the past week and after it became increasingly apparent that China’s economy was slowing, the Norwegian Krone extended losses versus its peers. This is due to speculation that the manufacturing output contraction in the world’s second-largest economy will see continued dampened demand for crude oil.
Crude prices have fluctuated considerably of late amid mixed messages from understandably uncertain traders. Officials in China dismissed the slowdown as an exaggeration, but that preceded the terrible manufacturing print. The US rig count is dropping but supply continues to outweigh demand by a considerable margin. With oil producing countries showing increased reluctance to curtail oil production, many fear that prices will remain weak for a long time and may never return to previous $100 per barrel levels.
The Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate rallied by around 2.3% during Thursday’s European session.
Such is the extent of the fallout from low oil prices; Norges bank was forced to cut the overnight cash rate by 25 basis points, causing the Krone to dive versus its major peers. The drop to a benchmark rate of 0.75% is an all time low for the Oslo-based central bank. In addition, the central bank predicts that the cash rate could fall to as low as 0.59% in the third-quarter of next year if oil prices continue to struggle. ‘Growth prospects for the Norwegian economy have weakened, and inflation is projected to abate further out,’ Governor Oeystein Olsen said in a statement.
Not only have low oil prices weighed on Norwegian growth prospects, they’ve also had a detrimental impact on unemployment. Oil producing companies have been forced to cut staff numbers lest they fail to turn any kind of profit. Unemployment is now hovering at the highest since 2006 as oil companies have cut more than 20,000 jobs.
The Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate was trending in the region of 12.9323 during Thursday’s European session.
Looking ahead to next week, a lack of influential Norwegian economic data reports will see Krone trade in response to oil prices and market sentiment. Tuesday of next week will see Norwegian Retail Sales data, which has the potential to provoke Krone volatility. China’s economic data publications have the potential to impact upon Krone movement as well. Should the Far East nation’s data continues to disappoint, commodity prices will likely decline in response.
The Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate was trending within the range of 12.5735 to 12.9482 during Thursday’s European session.