The Pound attempted to hold the Norwegian Krone at bay on Monday as news confirming Theresa May as the new UK Prime Minister boosted Sterling sentiment and helped to slightly soften Brexit jitters. GBP/NOK fluctuated in the region of 11.00 on Monday afternoon.
Pound (GBP) Boosted by Prime Minister Leadership Conclusion
After initially falling on Monday morning as Brexit jitters took hold once more, demand for the Pound improved slightly around midday as the UK Conservative Leadership contest came to a surprising conclusion.
Andrea Leadsom, one of the top two Conservative MPs running to be PM David Cameron’s successor, pulled out of the contest on Monday.
Citing May as a strong leadership candidate, Leadsom announced she would back May’s leadership around midday. Sources indicated that the contest’s media frenzy proved too much for Leadsom.
It is currently unknown when exactly Theresa May will take office, but 1922 Committee Chairman Graham Brady has confirmed that the contest will not be re-opened – making May the de-facto winner.
Due to the quick progress of the leadership campaign and the hope of political stability returning in the near future, Sterling was able to steady on Monday.
Brexit Jitters Continue to Pressure Sterling (GBP)
However, the Pound remained pressured as Brexit news weighed on investor confidence. Most recently, BDO released a report indicating that business confidence had plummeted in June and could fall further.
According to the report, business optimism and output hit a three year low due to fears of the Brexit’s effects on the UK economy. BDO followed the findings with comments urging businesses to remain strong and continue with UK investment in order to stave off damage.
Markets are also anxious this week amid the widely held expectation the Bank of England (BoE) will cut the key UK interest rate in its first post-Brexit meeting this upcoming Thursday.
Norwegian Krone (NOK) Creeps Higher Despite Poor Oil Prices
The commodity sensitive Norwegian Krone struggled to complete a recovery on Monday as prices of oil fluctuated lower.
Concerns about oil demand in Asia have weighed on the appeal of oil this week and US shale drillers adapted to low prices, indicating that they were still comfortable with prices closer to US$45 per barrel than US$50 per barrel.
Expectations that the Norges Bank may opt to cut Norway’s key interest rate in the coming months also weighed on the Krone slightly. However, other analysts have suggested that the central bank will halt its rate-cut cycle soon.
On the other hand, NOK struggled to keep the Pound from recovering during last week’s session.
GBP/NOK Forecast: Another Busy Week for Britain
As with other recent weeks, Sterling is likely to take point in this week’s movement of the Pound to Norwegian Krone exchange rate.
While the Pound has steadied since the new UK Prime Minister has been all but confirmed, uncertainty could set in again in coming days as investors bet over when exactly Theresa May will take office.
Some expect May to be in 10 Downing Street as soon as tomorrow evening, while others believe soon-to-be ex-PM David Cameron will want to hold one final Prime Minister’s Questions (PMQs) session later this week before his departure.
More vitally, the Bank of England (BoE) is due to make its first post-Brexit policy decision on Thursday. Markets believe there is a 75% chance of a rate cut, which would send GBP/NOK plummeting and increase relative favour for the Krone.