GBP/NOK Exchange Rate Rises as Uncertainty Hits Norges Bank Policy Outlook
The Pound Norwegian Krone (GBP/NOK) rose by 1% today, fluctuating around 10.916Kr following the Norges Bank interest rate decision, which held steady at 1.25%.
Norway’s central bank said its policy outlook had become more uncertain amidst rising global trade tensions and sinking oil prices. A policy statement released by the bank said:
‘Deepening trade tensions and heightened uncertainty surrounding the UK’s relationship with the EU may weigh on growth abroad and in Norway. On the other hand, a weaker [Norwegian Krone] may contribute to higher inflation ahead.’
Erik Bruce, an Economist at Nordea, said a rate hike in September is still likely, but global and domestic developments could encourage a wait-and-see approach from the central bank.
Frank Jullum, a Chief Economist at Danske Bank, was more upbeat:
‘The September decision will clearly depend on whether the domestic economy is showing any weakness. As we expect growth to remain above trend, we still expect a rate hike in September.’
Plunging oil prices are also weighing on the Norwegian economy, Europe’s second-largest oil producer.
GBP/NOK Exchange Rate Climbs Higher as UK Retail Sales Jump Unexpectedly in July
The Pound (GBP) rose following the release of retail sales figures for July. These exceeded estimates, growing by 0.2%, with department store sales climbing for the first time in 2019.
Year-on-year retail sales also improved, rising above the consensus 2.6% to 3.3%
Gabriella Dickens, an Assistant Economist at Capital Economics, commented:
‘The rise in retail sales in July was encouraging and supports our view that the economy has picked up in [the third quarter]… July’s figures leave us more confident that the economy avoided another contraction in Q3.’
Brexit continues to dominate headlines today, with Jeremy Corbyn calling on Labour MPs and rebel Tories to unite against Boris Johnson’s pursuit of an October no-deal.
This follows comments made by Johnson yesterday in which he declaimed recent political moves as an attempted coup between some MPs and the EU.
With an EU-UK stalemate now stalling negotiations over the Irish backstop, many Sterling traders remain cautious.
GBP/NOK Outlook: Oil Prices and Global Trade Developments in Focus
Norwegian Krone traders will be keeping a close eye on oil prices and global trade developments.
Any further indications of a flare-up between the US and China could see oil prices sink, weakening market confidence in the oil-sensitive Norwegian currency.
The GBP/NOK exchange rate will likely remain susceptible to Brexit developments into next week, any further promise of a thwarted October no-deal establishing a good basis for Sterling to hold onto today’s gains.