Hawkish Norges Bank Sends Norwegian Krone (NOK) Exchange Rates Higher
The Pound to Norwegian Krone (GBP/NOK) exchange rate shed most of its weekly gains on Thursday thanks to an unexpectedly hawkish tone from the Norges Bank.
Pound (GBP) Exchange Rates Fail to Find Support from UK Retail Sales & BoE Decision
Most of this week’s UK news has been relatively supportive, but has not been able to boost Pound Sterling (GBP) exchange rates due to Britain’s cloudy economic outlook and lingering uncertainty around the Brexit process.
Wednesday saw UK wage growth beat expectations in October, while Thursday’s UK retail sales results from November were highly impressive.
UK retail sales were forecast to come in at 0.4% month-on-month and 0.3% year-on-year, but jumped to 1.1% and 1.6% respectively.
Analysts noted this was due to the success of Black Friday. However, the Pound’s gains on the data were limited due to analyst concerns that Black Friday success would take away from December shopping.
The Bank of England’s (BoE) December policy decision had no real impact on the Pound outlook either, disappointing those investors who had hoped the bank would take a more hawkish tone due to recent UK data.
Progress in the Brexit process was acknowledged by bank officials, but uncertainty remained high. Overall, the bank still predicts that UK interest rates will only rise gradually over the coming years.
Norwegian Krone (NOK) Exchange Rates Boosted by Norges Bank Hints
As expected, Thursday’s Norges Bank policy decision saw the bank holding monetary policy frozen.
However, hawkish investors were pleasantly surprised by the bank’s shift in tone.
The bank hinted that it now expects to raise Norwegian interest rates ‘somewhat earlier’ than previously forecast. This was largely due to higher inflation projections for 2018 and beyond.
Norges Bank predicts growth of 2.3% in 2018, with the unemployment rate expected to drop to around 2.4%
Overall, Norges Bank’s hints that it would likely tighten monetary policy sooner than previously expected led to a surge in demand for the Norwegian Krone.
GBP NOK Exchange Rate Forecast: Brexit Back in Focus
Despite a week of influential UK ecostats, Pound Sterling (GBP) exchange rate movement has been limited.
However, this week’s EU summit may provide some indication of when the second phase of Brexit talks are likely to begin.
If it appears that trade discussions will begin shortly, Sterling could rally against its rivals.
Friday will also see the publication of Norway’s November trade balance update, which could influence the Krone slightly before the end of the week.
As next week’s economic calendar will be relatively quiet until Britain’s final Q3 Gross Domestic Product (GDP) results are published, the Pound to Norwegian Krone exchange rate is likely to be driven by further Brexit developments and oil price movements.