After Norway’s central bank cut the benchmark interest rate by 25 basis points, the Krone softened versus a number of its major peers.
GBP/NOK Exchange Rate Advances after BoE Minutes Ease Rate Cut Fears
On Wednesday of this week the British Pound dived considerably in response to Chancellor George Osborne’s budget statement. Massive objection to disability welfare cuts was not the Chancellor’s greatest problem, however. He failed to meet with his targets for cutting the budget deficit by quite a margin. What’s more, Osborne reduced expectations for public spending and cut growth forecasts for both 2016 and 2017.
Despite these glaring issues, the Sterling depreciation was comparatively short-lived. This was due to Thursday’s Bank of England (BoE) interest rate decision. Although the central bank kept policy unchanged, as was expected by nearly every surveyed economist, the accompanying meeting minutes threw up somewhat of a surprise.
The minutes suggested that, whilst inflation and growth outlook remains tepid, policymakers still believe the next move will be a rate hike, not cut. Policymakers did cite EU referendum uncertainty as a factor in holding rates, but given that the BoE was not expected to hike rates before June 23
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even before the announcement of the referendum, this news was not particularly impactful.
NOK Exchange Rates Soften, but NOK/EUR Gains
After Norway’s central bank cut the overnight cash rate by 25 basis points to 0.5%, the Krone softened versus most of its currency rivals. Norges Bank highlighted the ongoing struggle against low oil prices as the principle reason for lowering rates.
The Norwegian Krone did manage to eke out a small gain against the Euro, however. This suggests that the interest rate cut was not quite as aggressive as policymakers had priced-in. However, central bank officials stated that policy may need to be eased again in 2016, not ruling out the potential for negative rates.
Negative interest rates have been the buzz subject in economics this year. Both the European Central Bank and Bank of Japan are amongst those who have adopted negative rates as a radical policy tool to shore up flagging inflation. However, many G-20 officials have openly criticised the policy as potentially dangerous given uncertainty as to its impact both domestically and globally.
GBP/NOK Exchange Rate Predicted to Hold Gains, Norwegian Unemployment Data to provoke Volatility
With a complete absence of British economic data on Friday of this week, the GBP/NOK exchange rate will likely see movement in response to Norway’s Unemployment Rate data. Unemployment is predicted to rise fractionally.
With that said, there is a chance that the Pound will cool as traders take advantage of attractive selling positions from today’s uptrend.
Next week will be comparatively quiet in terms of domestic data for both the UK and Norway given that Friday will see most markets closed for the Easter holiday celebrations.
Over the past seven days, the GBP/NOK exchange rate was trending within the range of 11.9319 to 12.2130.