The Pound to Norwegian Krone exchange rate plunged to new lows on Thursday as a bullish Krone easily capitalised on a limp Sterling. While Sterling lacked any trade footholds, the Krone surged due to higher oil prices and news from Norges Bank. As a result, GBP/NOK fell to a monthly low of 10.5896 and trended near that level at the time of writing.
Pound (GBP) Weak Amid ‘Hard Brexit’ Concerns
Despite a report published by the Office for National Statistics (ONS) on Wednesday indicating that Britain’s economy has seen little ill effect from the Brexit vote thus far, investors were instead more concerned about the long term as they hesitated to buy the Pound.
Comments from European Union officials may have finally gotten to previously optimistic UK government officials, as insistence from EU officials that Britain would not be able to maintain access to the single market following a Brexit finally began to sink in.
UK Chancellor Philip Hammond indicated earlier in the week that Britain may have to give up on single market access following the Brexit, which weighed heavily on Sterling appeal.
Coupled with a lack of supportive British ecostats, there has been little reason for investors to turn to the Pound this week.
Norwegian Krone (NOK) Soars on Norges Bank’s Neutral Stance
Norway’s central bank, the Norges Bank, held its September policy decision on Thursday morning and markets were shocked by the lack of dovishness in the tone of its monetary policy report.
The Norwegian Krone soared across the board immediately following the decision, taking it to highs against many major rivals (including a 2016 high against the Euro).
In its meeting minutes, Norges Bank indicated that it may be moving away from its usual easing bias, following many cuts due to oil price issues hitting Norway’s economy hard over the last year. The neutral tone of the bank surprised markets, driving them in droves to buy up the Krone.
A slight increase in oil prices following the Federal Reserve’s disappointing September interest rate decision also boosted Norwegian Krone demand. As oil is priced in US Dollars, Wednesday evening’s ‘Greenback’ selloff boosted demand and the price of Norway’s most lucrative commodity.
GBP/NOK Forecast to Bounce Back from Lows?
Following a fall as sharp and sudden as the Pound to Norwegian Krone’s fall on Thursday morning, a little rebound is inevitable once investors have finished piling into the Krone.
Investors will be selling the Krone from its best levels in order to make a tidy profit, but due to higher hopes for Norway’s economy the Krone is likely to remain near its highs rather than return to this week’s opening levels.
There is also potential for the pair to weaken if oil prices dip again, as is likely due to the continued glut in global oil supply.
Despite this, GBP/NOK is well on track to end the week over 10
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below the week’s opening levels, and the Krone will continue to drive the pair’s movement due to a lack of key British ecostats due before next week.