GBP/NOK Exchange Rate Sinks as Norwegian Manufacturing Sinks in June
The Pound Norwegian Krone (GBP/NOK) exchange rate fell today, leaving the paring trading around 10.838kr despite weak Norwegian manufacturing output figures in June.
Norway’s manufacturing output eased from 0.3% to a worse-than-expected -1.0%.
However, Erik Johannes Bruce, an Analyst at Nordea Markets, argued that this was not wholly a surprise after two months of solid growth, with the second quarter being 1.7% above the first quarter.
Mr Bruce said:
‘We had expected a sharper correction. The trend is pointing strongly upwards and manufacturing production is up as much as 1.7% [quarter-on-quarter] in [the second quarter]. It is, no surprise again, industries delivering capital goods to the oil sector which pull up due to the strong growth in oil investment.’
As oil is Norway’s largest commodity at 22% of its GDP and 67% of its global exports, recent global trade tensions saw oil prices fall, thus weakening market confidence in the Norwegian Krone.
Strategists at the financial services company ING were upbeat however:
‘[O]il prices remain a big question mark on the [Norwegian] Krone’s outlook in the short-term, and much will likely depend on the impact of Saudi [Arabia’s] activism on oil prices. In the longer term, we expect oil prices to keep rising … and fuel a recovery in the currency.’
GBP/NOK Exchange Rate Falls as No-Deal Brexit Fears Weigh on House Prices in July
The Pound fell following today’s publication of the RICS Housing Price Balance figures for July, which fell to a worse-than-expected -9%.
Simon Rubinsohn, a Chief Economists at RICS, commented:
‘The latest RICS results will provide little comfort for the market with all the key indicators pretty much flat lining. Indeed, the forward-looking metrics on prices and sales also seem to losing momentum as concerns… [as] both Brexit and political uncertainty heighten.’
No-deal Brexit fears continue to hold back the Pound today.
However, hopes have risen over Tory rebels and Labour MPs stepping forward to prevent a disorderly exit on October 31.
Shadow Chancellor John McDonnel said:
‘Labour can form a majority government and we expect others to come behind us to do that, so it becomes a caretaker government. And part of that will be to say: yes, we will block a no deal and go back to the country in a referendum.’
GBP/NOK Outlook: Could the Norwegian Krone Fall on Weak Inflation Data?
Norwegian Krone traders will be awaiting tomorrow’s publication of the year-on-year Norwegian core in inflation figures for July, which are expected to ease from 2.3% to 2.2%.
Tomorrow will also see the publication of the monthly Norwegian Producer Price Index for July.
Meanwhile, Sterling traders will be awaiting tomorrow’s flash growth figures for the second quarter, which are expected to ease from 0.5% to 0%.
As a result, we could see the GBP/NOK exchange rate sink further.
The GBP/NOK exchange rate is expected to remain subdued for the rest of this week as negotiations between the UK and the EU over Brexit appear to show no signs of progressing.