Although the GBP NOK exchange rate started the week on a softer footing this did not last long, with investors galvanised by a speech from Prime Minister Theresa May. Speaking at the CBI conference, May sought to ease worries of a ‘Brexit cliff edge’ and raised the prospect of a transition deal to ease the UK’s passage out of the EU. Although a high level of uncertainty still surrounds the whole issue this still reassured investors, sending the Pound on a bullish run across the board.
The Krone was boosted on Tuesday by a surprising recovery in the fourth quarter consumer confidence index, which rebounded from -5.5 to 0.3. Stronger consumer confidence bodes well for the domestic economy, prompting investors to pile back into the Krone. This pushed the GBP NOK exchange rate off its monthly best of 10.6, in spite of a strong US Dollar limiting the general appeal of higher-yielding currencies.
Another positive sign for the Norwegian economy came from September’s unemployment rate, which also showed an improvement. With the headline figure sinking from 4.9% to 4.8% the Krone continued to trending higher against its rivals, even as the oil market began to falter on worries over the high levels of global production.
GBP NOK Exchange Rate Higher Despite Weak OBR Growth Forecasts
While Chancellor Philip Hammond’s Autumn Statement was not particularly optimistic with regards to the domestic outlook that didn’t stop the Pound from rallying on Wednesday afternoon. In large part this increased demand for Sterling appeared to be due to the news that the government was ditching the goal of reaching a budget surplus by the end of the current Parliament, instead planning an additional 122 billion Pounds of borrowing. This overshadowed the downward revisions to various Office for Budget Responsibility forecasts, although the impact of these could still be felt in the near term.
Oil prices rallied once again on the back of an unexpected decrease in US crude stockpiles, which fell by 1.2 million barrels on the week. This offered further support to the Krone, temporarily diminishing worries over the persistent state of global oversupply. Even so, while Brent crude trended above the US$49 per barrel mark, doubts remain over the prospect of a coordinated action to limit production amongst OPEC members. The appeal of higher-risk assets was equally limited by the high odds of the Federal Reserve raising interest rates before the end of the year.
Stronger Retail Sales Forecast to Boost Krone
Markets are not expecting to see any particular change in the second estimate of the UK’s third quarter GDP data, with the headline figure expected to still show growth of 2.3% on the year. Although concerns over the future of the UK economy are likely to persist for some time to come, a steady result here could offer the Pound some support. Even so, the more bearish outlook of the OBR’s Autumn Statement forecasts could limit the upside potential of Sterling this week.
Confidence in the Krone could be boosted on Monday, however, with forecasts pointing towards a solid improvement in retail sales on both the month and the year in October. Higher levels of consumer spending would indicate greater confidence within the Norwegian economy. This would suggest that economic conditions remain robust, encouraging optimism in the domestic outlook. If risk appetite also remains elevated then the GBP NOK exchange rate looks set to slump afresh.