Unexpected Decline in UK Factory Activity Leaves GBP/NOK Exchange Rate Unmoved
The Pound Norwegian Krone (GBP/NOK) exchange rate is trending in a narrow range this morning as the UK’s latest manufacturing PMI misses expectations.
At the time of writing GBP/NOK is largely unmoved from this morning’s opening levels, with the disappointing PMI reading having cut Sterling’s early advances short.
Pound (GBP) Struggles to Advance as UK Factory Activity Eases
The Pound has found its attempts to advance against the Norwegian Krone scuppered this morning by the release of the UK’s latest manufacturing figures.
According to data compiled and published by IHS Markit, UK factory activity unexpectedly slowed last month, with the index sliding from 56.2 to 55.3 in January.
This was notably lower than the modest rise to 56.5 which had been forecast by economists and saw manufacturing growth slow to a seven-month low.
The decline was largely driven by more modest output growth as the pace of production continues to slide following November’s highs.
On top of this, rising input costs became an increasing concern for manufacturers, cutting into profits and forcing firms to pass the burden onto consumers by raising prices to their highest levels in nine months.
Despite these concerns many analysts remain upbeat about the sector’s growth potential in 2018, part in thanks to strong overseas demand.
Lee Hopley, chief economist at EEF, the manufacturers’ organisation said:
‘The first PMI reading for 2018 points to a good enough start to the year for manufacturers. Positive global factors underpinning growth, evident through much of last year, are still very much in play with export demand continuing to put in a strong showing.’
Norwegian Krone (NOK) Supported by Stronger than Expected Manufacturing PMI
Meanwhile Norway also published its manufacturing PMI this morning, with a surprise uptick in factory activity helping to support the Krone.
Growth in Norway’s manufacturing sector proved to be far more robust that expected in January as the purchasing managers’ index rose to 59. This comes after December’s reading was revised up from 57.8 to 58.1.
However analysts warned about reading too much into last month’s index, suggesting that the decline in both new orders and employment may point to the sector slowing again over the coming months.
GBP/NOK Exchange Rate Forecast: Dip in Construction Activity to Pressure Sterling?
Looking ahead the GBP/NOK exchange rate may slip at the end of this week’s session as the UK publishes its latest Construction PMI.
Economists expect activity in Britain’s construction sector to have slowed again in January, with the index expected to dip from 52.2 to 52.0.
Nevertheless, any impact on the Pound may prove to be negligible given that the sector only accounts for around 6% of the UK’s economy.
At the same time the Norwegian Krone may tick a little higher on Friday as Norway’s latest unemployment report is expected to show that the number of Norwegians out of work fell from 87,000 to 86,000 in January.