Concerns over Public Sector Spending in UK Budget Triggers GBP/NOK Exchange Rate Decline
The Pound to Norwegian Krone (GBP/NOK) exchange rate has fallen by -0.4% today on growing concern about the upcoming budget statement and negative UK domestic data.
In the case of the former, there has been a growing clamour for Chancellor Philip Hammond to start spending more on public services.
As it stands, the Spring Budget is supposed to be a watered-down version of the Autumn Statement, both in terms of content and importance.
With that in mind, some believe that the Spring Budget statement will only last for around 15 minutes, leaving little room for major revelations or detailed plans.
It is currently unclear if Hammond will respond to pressure to relieve the strain on public services with a fresh round of spending.
In a hint of a possible change of plans, officials at the Treasury have stated that:
‘[We] will retain the option to make changes to fiscal policy at the Spring Statement if the economic circumstances require it.’
Pound to Norwegian Krone Exchange Rate (GBP/NOK) Losses Increased by UK Production Data
Another factor dragging the Pound to Norwegian Krone (GBP/NOK) exchange rate down today has been generally negative UK economic news.
The national trade deficit has expanded in January, while construction activity has dropped by -3.9% in the same month.
Rising levels of manufacturing and industrial production have failed to reassure Pound traders, who have remained focused on the trade deficit.
Providing extra detail, the Office for National Statistics (ONS) said:
‘The total UK trade (goods and services) deficit widened by £3.4 billion to £8.7 billion in the three months to January 2018. Comparing the three months to January 2018 with the same period in 2017, the UK total trade (goods and services) deficit widened by £0.4 billion.’
Norwegian Krone to Pound (NOK/GBP) Exchange Rate Rises after Inflation Rate Upgrade
After a sudden surge in Norway’s inflation rates, the Norwegian Krone to Pound exchange rate has risen sharply today.
Norges Bank’s targets for inflation have been exceeded in February, following the Norwegian government’s lowering of base inflation targets.
Although a core year-on-year inflation level of 1.4% remains below Norges Bank’s 1.7% target, economists still believe that the bank is on track to raise interest rates later this year.
Summing up the situation, Nordea Bank Senior Economist Erik Bruce said:
‘With the strong labour market figures we now expect the coming rate path to have a full hike in September. We also believe Norges Bank will actually hike in September.’
Pound to Norwegian Krone Exchange Rate Forecast: GBP/NOK Volatility ahead on Spring Budget Uncertainty
As mentioned above, the Pound could turn volatile against the Norwegian Krone in the near-term when the chancellor Philip Hammond delivers the Spring Budget statement.
If Hammond reverses his austere track record and announces a surge in spending for public services such as the NHS, then the GBP/NOK exchange rate could improve.
The next significant news from Norway will be Norges Bank’s interest rate decision on 15 March.
Despite the latest inflation boost, the central bank isn’t expected to adjust rates from their present 0.5%.
Greater influence could come from the bank’s monetary policy report out on Thursday, and if this hints at one or more interest rate hikes in 2018 then the Norwegian Krone is likely to rally.