Pound Norwegian Krone (GBP/NOK) Exchange Rate Falters on Norges Bank Rate Hike Bets
The Pound to Norwegian Krone (GBP/NOK) exchange rate failed to maintain its bullish run on Thursday, with investors encouraged by the latest Norges Bank policy meeting.
Although as widely expected, the central bank left interest rates on hold, the mood towards the Norwegian Krone (NOK) nevertheless improved.
Markets are hopeful that Norges Bank will begin to raise interest rates sooner rather than later, given the improved outlook for inflation and economic growth.
The recent recovery in oil prices is also thought to have improved the case for policymakers to hike rates earlier than December, as currently pencilled in, with rising prices likely to prompt upward revisions to domestic forecasts.
This kept the Norwegian Krone on a stronger footing against its rivals, in spite of a surprise uptick in the November unemployment rate.
Stronger UK Wages Boost Pound (GBP) Exchange Rates as BoE Rate Hike Odds Increase
The losses of the GBP/NOK exchange rate were, however, relatively modest thanks to a general increase in demand for the Pound (GBP).
Wednesday’s surprise increase in UK weekly earnings excluding bonuses prompted investors to pile back into Sterling, boosting hopes that the long-running wage squeeze is starting to ease.
While the slight acceleration in wage growth does not materially alter the domestic outlook this was enough to encourage fresh bets over the likelihood of an imminent interest rate hike from the Bank of England (BoE).
Even so, the mood towards the Pound could rapidly sour if BoE Governor Mark Carney takes a less hawkish view in comments at the World Economic Forum in Davos.
On the other hand, if Carney alludes to the possibility of further monetary tightening this could see the GBP/NOK exchange rate making fresh gains heading into the weekend.
Norwegian Krone (NOK) Exchange Rate Strength Forecast with Rising Retail Sales
Confidence in the Norwegian Krone could improve further if December’s retail sales data proves positive when figures are released on Tuesday. This would be to the detriment of the GBP/NOK exchange rate.
Forecasts point towards another month of strong sales growth, which is thought to have accelerated to 4.1% on the year.
Any more signs of strength in the Norwegian economy are likely to further encourage bets on Norges Bank accelerating its return to tighter monetary policy.
On the other hand, if sales failed to pick up pace over the course of the festive season this could put NOK exchange rates under renewed pressure.
Any increase in global market jitters may also have a detrimental impact on the Norwegian Krone, with the risk-sensitive currency likely to decline if the risk of a trade war between the US and China increases.
GBP/NOK Exchange Rate Jitters Forecast on UK and Norway PMIs
January’s raft of UK and Norwegian PMIs could provoke further volatility for the GBP/NOK exchange rate, with investors on the lookout for any signs of economic weakness.
Another round of solid readings from the UK PMIs may give the Pound incentive to build on its recent gains, in spite of lingering Brexit-based concerns.
However, if the Norwegian manufacturing sector continues to expand at a bullish rate the appeal of the Norwegian Krone is likely to improve further.
Any particular loss of momentum, though, should offer the GBP/NOK exchange rate another solid rallying point next week.