The Pound Norwegian Krone exchange rate has been on a fairly steady road of decline since the UK went to vote on its EU membership and has fallen sharply again today to see the lowest rate experienced this year so far.
Rampant Brexit-based fears and uncertainty have kept the Pound pressured against all its rivals since the 24
th
of June, although it has been afforded some relief in the meantime.
Sterling fell again today as the Bank of England’s (BoE) Financial Stability Report proved to be as grim as expected, with it stating that the UK’s economic outlook is ‘challenging’.
Meanwhile, the Norwegian Krone enjoyed a slight rally earlier in the week as oil prices edged higher, but the Nordic currency failed to hold onto any gains as black gold prices fell once again.
Currently the Pound Norwegian Krone exchange rate trades at 10.9330 after slipping over 0.70% over this morning’s session.
Sterling (GBP) Harangued by Disheartening Construction News and a Grim BoE Report
The Pound has had a hard time of it since the UK voted to depart the European Union on the 23
rd
of June.
Immediately following the results, Sterling tanked approximately 10% across the board and has only continued to depreciate as UK lawmakers fail to instil confidence in an angry and disillusioned public that is desperate for some form of plan for the future.
Today’s Bank of England July financial stability report made for a fairly gloomy read. In an accompanying speech, Governor Mark Carney pointed specifically towards the UK’s current account deficit as being a cause for concern.
The stability report listed some other main areas from where uncertainty stems, such as the downturn in the UK’s commercial real estate sector, household debt and the vulnerable housing market, subdued European and global growth and the fragility of the markets. All these areas pose major uncertainty risks and are likely to keep the Pound subjugated until some of the issues can be dealt with.
It has also been a bad week for the Pound in regards to market data. The UK construction PMI printed at a woeful 46.0, signalling that the sector is definitely in contraction as the miasma of the unknown pre-Brexit kept investors from committing to large commercial and residential projects. The services PMI also missed forecasts but stayed above contraction at 52.3, bringing the overall composite PMI to 52.4. This is the first time we have seen major movement in the Pound caused by ecostats since before the Brexit vote.
Norwegian Krone sees Oil-Related Rally but Fails to Secure Gains
Norway is a massive exporter of oil and as such, the Norwegian Krone moves substantially in relation to oil prices.
On Monday, oil rose above $50 a barrel for the first time this month and as a result the Krone saw notable rallies but, unfortunately, they were short lived as oil depreciated as the day went on to hover around the upper end of $48. Oil has been experiencing some major swings of late as global demand rises and falls alongside stockpiles and increased world-wide risk aversion keeps producers on their toes.
Oil prices were undermined when OPEC announced no plans to cap production in 2016 earlier this year as emerging oil producers such as Iran would be unfairly hamstrung.
There was good news for the Norwegian economy, however, as fish exports have increased in value almost 25% for the first half of this year compared to last. Global demand for salmon has seen prices rise and America taking a larger portion of the Norwegian fish exports has afforded the industry a healthy boost.
The recent Norwegian manufacturing PMI has also posted a significant increase from 51.8 to 53.5.
Pound Movement May be Easier to Forecast as GBP Reacts to Domestic Ecostats
Later in the week there is a smattering of UK ecostats set to be released. On Thursday the year-on-year industrial and manufacturing output reports are expected, with both data sets forecast to fall. Industrial production is predicted to fall over 1% to just 0.5% and manufacturing is expected to fall from 0.8% to 0.6%.
As yesterday was the first time we’ve seen Sterling movement in relation to ecostats since before the referendum, it’s difficult to say whether this data will elicit appreciation or depreciation in any meaningful regard. If the data prints wildly out of expectations then we could expect to see some movement.
Norway has both year-on-year industrial and manufacturing output reports coming out on Thursday. Industrial output is expected to fall from 3.2% to -2.8%. Manufacturing is forecast to stay in contraction but the figure is expected to improve from -5.2% to -3.4%. The Norwegian Krone could expect to see some support if reports print favourably.
The Pound Norwegian Krone exchange rate is not expected to find any major gains until the economic and political landscape in the UK clears up somewhat, which may prove to be some time away.