The Pound to Norwegian Krone exchange rate plunged on Monday as the weekend’s Brexit news hit Sterling. However, GBP/NOK’s losses were limited by news that oil prices had slipped on concerns of higher oil production from non OPEC oil producers. GBP/NOK trended at around 10.40 at the time of writing.
Pound (GBP) Undermined by Prime Minister’s Brexit Comments
Sterling was hit by a selloff on Monday morning as investors reacted to the weekend’s Brexit comments from UK Prime Minister Theresa May.
May has been infamously vague on the UK government’s Brexit stance, which has been a persistent point of weakness for the Pound in the last half a year.
On Sunday, May stated that the UK would not simply be able to keep ‘bits’ of its European Union membership if it leaves. These comments came in response to recent criticism that May’s Brexit stance had been ‘muddled’.
As investors perceived this as May playing down the possibility of retaining certain EU membership benefits, Sterling reacted on Monday morning by plummeting.
Norwegian Krone (NOK) Weakened by Oil Production Concerns
Prices of oil, Norway’s most lucrative commodity export, have improved considerably in recent weeks due to market-wide expectations that OPEC’s agreed plans to curb oil production among members and some non-members (including Russia) would lead to a long-term increase in oil demand.
However, the commodity dropped by 1USD per barrel on Monday as concerns grew that other non OPEC oil producers like the US were increasing oil production to fill the gap left by nations who cut production and output.
Specifically, signs increased that the US was upping oil production due to drilling activity in the nation. This offset optimism from the news that Russia had cut 100,000 barrels per day as proposed.
GBP/NOK Exchange Rate Forecast: Will Brexit Concerns Continue to Push Pair Lower?
Despite Monday’s GBP selloff, the Pound to Norwegian Krone exchange rate avoided its worst daily levels due to the oil price slide worsening demand for NOK.
As a result, while GBP/NOK could continue to trend with a downside bias in coming days due to ongoing Brexit fears, oil prices will need to see an improvement for the Krone to capitalise on this Sterling selloff.
GBP/NOK may also be influenced slightly by domestic data in the coming days. Tuesday will see the publication of Norway’s December inflation results.
Most of the week’s UK data will be published on Wednesday, including Britain’s November trade deficit figures, industrial production and manufacturing production results.
However, the underlying movement of GBP/NOK is likely to continue. If the UK government can relieve Brexit concerns somehow, Sterling demand may improve and recover some of its losses against the Norwegian Krone.