The Pound to Norwegian Krone exchange rate advanced last week and could be on track to see another week of gains thanks to a continued slip in oil prices, despite Tuesday’s Pound selloff. At the time of writing, GBP/NOK was trending just above the week’s opening levels of 10.09 after recovering from Tuesday’s drop.
Pound (GBP) Slips as Markets Speculate on further BoE Easing
After trending sturdily for about a week on hopes that UK MPs would be able to have some kind of Parliamentary vote on the final Brexit deal, Sterling’s support gave way on Tuesday and the currency slumped.
This was largely due to comments made by UK Chancellor Philip Hammond. Not only did Hammond indicate that the low value of the Pound would indeed cause a spike in inflation, he also stated that the UK government had no reason to refuse further quantitative easing from the Bank of England (BoE).
To many investors, this was an indication that the BoE could indeed be planning an extension to its QE scheme. Higher BoE easing bets left the Pound weaker. Investors were also spooked by the possibility of a long period of high UK inflation with ultra-low interest rates.
Norwegian Krone (NOK) Loses Appeal on Oil Glut Worries and Lower Commodity Prices
The oil-correlated Norwegian Krone has become increasingly volatile over the last week. The initial drop in NOK demand was largely due to oil prices reaching their highest point in a year, which led to a market selloff of the commodity.
However, while oil sentiment ended last week strong, the commodity continued to lose value this week as optimism towards OPEC’s planned oil output cap faded.
News that non-OPEC oil producers planned to continue ramping up oil production as normal, as well as news of a surprisingly high US crude oil stock on Wednesday, kept investors wondering if oil prices really were going to improve.
GBP/NOK Forecast: Norges Bank October Meeting Ahead
Thursday looks to be a key session for Pound to Norwegian Krone traders, as the morning of the European session will see multiple key reports from Norway and Britain.
Norway’s August unemployment rate will be published first thing, with analysts hoping for an improvement from 5% to 4.9%. This will be followed by Norges Bank’s October policy meeting, at which policymakers are expected to keep the national interest rate held at 0.5%.
Later in the morning, Britain’s most important dataset of the week will be published; preliminary Q3 Gross Domestic Product (GDP) scores. Forecasters expect British growth to have slipped to 0.3% quarter-on-quarter, but hold at 2.1% year-on-year.
This will be the most solid indication thus far of how Britain’s economy performed in the first quarter since the Brexit vote. As a result, a far better-than-expected score could bolster Pound demand and give the currency stronger support. Lower-than-expected growth would instead cause traders to grow concerned that post-Brexit Britain could be worse than feared.
However, as GBP investors continue ignoring domestic data, it could be oil prices and the Norwegian Krone’s reactions to this that drive movement in GBP/NOK this week.