Pound to Norwegian Krone: Tension over Brexit Deadline Triggers GBP/NOK Exchange Rate Decline

Brexit Deal Struck, but Pound Sterling Exchange Rates Fail to Benefit

Pound traders remain on edge today, preventing positive Brexit news from improving the Pound to Norwegian Krone exchange rate.

In the latest Brexit update, it has been reported that the UK may have finally made enough progress on core issues to move on to trade discussions.

Having failed to secure an Irish border deal earlier in the week, it has now been stated that the UK, EU and Northern Ireland may have ironed out their differences.

Representing the Irish government, a spokesman said;

‘We achieved our goals in phase one of negotiations, preserving the common travel area, protecting the Good Friday agreement and obtaining a guarantee of no hard border’.

The Pound initially rose on this news, but has since declined on jitters about a looming Brexit deadline.

UK Production Stats Fail to Ensure GBP/NOK Rate Rise

Moving away from politics, UK news has also included the release of production stats for October.

Annual manufacturing and industrial figures have impressed with over 3% annual growth, but month-on-month stats have been less supportive.

Giving a positive outlook, ONS Statistician Kate Davies said;

‘The longer-term picture is one of strong growth’.

Crude Oil Prices Boost Norwegian Krone after Mixed Production Data

Rising manufacturing activity and higher oil prices have supported the Norwegian Krone today, despite some alarming industrial output readings.

On the year in October, Norwegian manufacturing levels rose by 1.9%, but industrial production fell by -2% on the year and by -1.4% on the month.

Brent crude oil prices have hit the $63.14 per barrel mark recently, keeping costs near the highs of early November.

Turbulence ahead for GBP/NOK Rate on UK Job Stats and Brexit Updates

Brexit will remain in the spotlight next week, with last-minute negotiations culminating in a crucial EU summit over 14th and 15th December.

Whether or not the UK is able to progress to trade talks and discussions about a transitional deal depends on if the EU perceives that enough progress has been made in the first stage of talks.

If the UK’s frantic negotiations pay off and Brexit is seen to be moving forward, the Pound could rise sharply against the Krone.

Additional influence could come from UK inflation and earnings stats on Tuesday and Wednesday, coupled with Thursday’s Bank of England (BoE) interest rate decision.

If inflation falls and earnings rise then the Pound could appreciate, while BoE confidence about Brexit may also improve GBP/NOK trading.

Next week’s Norwegian data will be spread over Monday, Thursday and Friday, covering inflation, interest rates and trade.

GBP/NOK Exchange Rate Forecast

Norwegian inflation is expected to rise from 1.2% to 1.4% on the year.

Even if forecasts are accurate, however, inflation will remain far below the Norges Bank target of 2.5%.

The bank itself will be centre stage on Thursday, announcing the last interest rate decision of 2017.

Economists don’t expect much, as no rate change from 0.5% has been pencilled in.

Norges Bank officials could still drop hints about the 2018-2019 interest rate path, which some believe will lead to gradual rate hikes.

Rounding off Norwegian news, national trade balance stats are out on Friday and analysts forecast a reduction in the current surplus.

If Norges Bank officials don’t touch on future rates and the trade balance drops by more than expected, the Norwegian Krone might lose ground to the Pound next week.

Hannah Wilson

Contact Hannah Wilson