The Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate suffered a sharp drop on Thursday morning, hitting a new weekly low of 11.6946, after a weak Pound was throttled by the risk-correlated Krone’s reaction to a sudden jump in oil prices. However, Sterling rebounded slightly in response to a unanimous Bank of England (BoE) interest rate decision.
GBP/NOK was down around -0.4% at the time of writing and trending in the region of 11.7333.
Pound Weak as Investors Prepared for ‘Super Thursday’
Sterling’s defences had been low on Thursday morning ahead of what economists call ‘Super Thursday’, which sees the Bank of England (BoE) announce its key rate decisions and inflation report.
The BoE kept the benchmark rate at 0.5% as analysts expected, however the Pound’s defences were slightly bolstered on news of a 9-0 unanimous decision to leave interest rates frozen.
Investors had initially been wary that some BoE policymakers could vote for a cut, a signal which would indicate that borrowing costs could be lowered in the near future.
The central bank also cut UK growth forecasts from 2.2% to 2.0% as feared, which is likely to slow any Sterling recovery. Lastly, the BoE warned markets of even slower growth in the event of a ‘Brexit’.
Sterling had previously struggled to hold its ground on news that UK industry was entering its third recession in 8 years, as the Office for National Statistics (ONS) revealed on Wednesday.
Norwegian Krone (NOK) Rallies on Oil Despite Mixed Data
The Krone dragged Sterling sharply downward on Thursday in response to widespread headlines that oil prices were on the rise.
Reports indicated that oil prices approached a six-month high on Thursday in response to curbed production and a surprising plummet in US crude oil inventories. The news allowed the oil-correlated Krone to advance sharply.
Oil production has been dented as a wildfire continues to rage over Canadian oil sands while Nigerian oil production has been halted as a result of militant attacks.
Thursday morning’s key GDP growth rate report indicated that Norwegian growth accelerated quarter-on-quarter from -1.3% to 1%, and year-on-year from 0.1% to 0.7%. The Norges Bank also announced that the key interest rate would remain at 0.5%.
GBP/NOK Exchange Rate Forecast
With investors actively moving on the Pound as they respond to the Bank of England’s (BoE) mixed ‘Super Thursday’ announcements, recovery attempts remain a possibility.
GBP/NOK experienced a modest rebound following Thursday morning’s sharp drop in response to news that the BoE decision to freeze rates was unanimous. On the other hand, lowered growth outlooks could weigh on the Pound going forward.
Also of note is the projected rise of oil prices. If oil prices continue to increase as some analysts predict, the oil-correlated Norwegian Krone is unlikely to drop considerably. Norwegian data is quiet until next week’s April trade balance report.