Pound to Norwegian Krone Exchange Rate Recovers as Norway’s Unemployment Misses Forecast
While hopes for a ‘softer’ Brexit have helped the Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate to hold its ground in recent weeks, it has been unable to advance much due to resilience in the Norwegian Krone (NOK).
In recent weeks, GBP/NOK has generally been trending closely to the interbank level of 10.74. Last week saw GBP/NOK edge slightly lower in the region of 10.73.
Since markets opened on Monday, GBP/NOK has briefly touched a high of 10.76 and a low of 10.70, but at the time of writing the pair was rising from its worst levels and trending near 10.76.
Despite news that the Brexit process was now being handled by the UK government’s Cabinet Office rather than the Department for Exiting the EU, the Pound (GBP) has been unable to sustain much in the way of gains against the Krone this week.
However, the pair was able to hold itself above its weekly lows as Norway’s latest unemployment stats weighed on NOK.
Pound (GBP) Exchange Rates Damp as Bank of England (BoE) Uncertainties Persist
While this week’s Brexit developments did boost demand for the Pound (GBP), too many uncertainties remained to keep the currency looking appealing for long.
There are still uncertainties about how the Brexit process may impact UK politics or economics, which have dampened Bank of England (BoE) interest rate hike bets.
Markets generally predict the BoE will hike UK interest rates at its August policy decision meeting next week. However, recent UK data has disappointed and some analysts suggest it could give the bank reason to hold off on a rate hike if it wishes.
Essentially, the Pound is avoiding falls due to BoE rate hike and ‘soft Brexit’ hopes, but these have not been enough to help the Pound mount a more bullish run.
On top of this, Thursday night saw EU Chief Negotiator Michel Barnier rule out a key aspect of UK Prime Minister Theresa May’s customs proposal.
Norwegian Krone (NOK) Strength Limited as Unemployment Data Disappoints
This week’s Norwegian data has been mixed, but it has ultimately been enough to help the usually sturdy Norwegian Krone (NOK) hold out against the Pound (GBP).
Demand for the Krone did however weaken slightly on Thursday, following the publication of Norway’s May unemployment rate.
The figure was forecast to remain at 3.7%, but unexpectedly worsened to 3.8%. This indicated that fewer people than expected were finding jobs.
Ultimately though, market optimism regarding the Norges Bank monetary policy outlook and Norway’s stronger-than-expected Q2 industrial confidence data have helped to keep the Krone sturdy.
The Krone has been gradually climbing against many European rival currencies this year, including the Pound.
Pound to Norwegian Krone (GBP/NOK) Forecast: Norway Retail Data and BoE Ahead
Next week could be a more influential one for the Pound to Norwegian Krone (GBP/NOK) exchange rate, depending on the results of upcoming key data from Norway and the outcome of the Bank of England’s (BoE) August policy decision.
Monday will see the publication of Norway’s June retail sales results, which could dampen market demand for the Norwegian Krone (NOK) if it disappoints.
However, demand for the Pound is unlikely to particularly improve unless the Bank of England gives investors more reason to be bullish in its highly anticipated policy decision.
Markets are betting that an interest rate hike from the BoE next week is more likely than rates being left frozen again, but if the bank makes a ‘dovish hike’ (and says it is a ‘one off’) then the Pound’s (GBP) potential for gains will still be limited.
For the Pound to Krone outlook to rise, the BoE would need to confidently hint that more rate hikes are likely on the way.
If the bank leaves rates frozen or hints that Britain’s economic outlook has worsened, the Pound to Norwegian Krone exchange rate could be in for some losses next week.