For several months now the Norwegian Krone has struggled against the rapid decline in oil prices as supply severely outstripped demand. Now that oil prices have risen to trend in the region of $40 a barrel, will Norges Bank cut the overnight cash rate to zero in 2016 as has been forecast by many analysts?
GBP/NOK Exchange Rate Declines despite Mostly Positive UK Data
Over the past seven days, the Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate was trending within the range of 12.0477 to 12.2524.
On Wednesday the British Pound endured a mixed-faring versus its major peers. A slight lean towards appreciation can be linked to mostly positive domestic data results. On the year, January’s Industrial Production advanced by 0.2%, bettering the median market forecast stagnation. On a monthly basis, however, January’s Industrial Production came in at 0.3% growth which was slightly below the market consensus of 0.4%. Somewhat more disappointing was the NIESR Gross Domestic Product Estimate for February which came in at 0.3%, a slight drop from the previous figure of 0.4%.
The British Pound is still holding a comparatively weak trade weighting in response to EU referendum uncertainty. Yesterday saw the Pound slide after Bank of England (BoE) Governor Mark Carney stated that the referendum was the greatest domestic risk to economic growth.
NOK/GBP Gains as Oil Prices Rise
Ahead of key US inventories data, crude oil prices have risen. This is supportive of demand for the Norwegian Krone. With crude prices having avoided massive depreciation for some time now, many analysts predict that Norway’s central bank may avoid cutting the official cash rate.
However, there are many industry experts that are not convinced the oil rally is sustainable. Oil prices gained in response to speculation that oil producing nations will cooperate with each other to bring the price of oil higher. However, this is thought to be pie in the sky given the many political differences between such diverse nations.
What’s more, Iran is showing no signs of wishing to slow production after they were frozen out of the markets for such a long time. Additionally, recent trade data out of China showed a massive decline in exports. This is thought to negatively impact demand for oil. If US stockpiles are shown to rise today, oil prices will be likely to fall. As a result, demand for the Norwegian Krone could be dampened.
GBP/NOK Exchange Rate Forecast: ECB Rate Decision in Focus
Thursday’s European Central Bank (ECB) interest rate decision is very likely to cause GBP/NOK volatility. If the ECB eases policy, as is widely expected, the Pound could strengthen as investors pull away from European majors. Thursday will also see the publication of Norwegian inflation data which should impact NOK exchange rates.
The Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate was trending within the range of 12.0920 to 12.1928 during Wednesday’s European session.