GBP/NOK Exchange Rate Eases, Norwegian Economy Remains Solid
The Pound Norwegian Krone (GBP/NOK) exchange rate eased this morning, with the pairing currently trading around 11.187kr after Norway’s monthly inflation rose by 0.6% and the country’s yearly core inflation for September beat forecasts, rising from 2.1% to 2.2%.
As a result, the Norwegian Krone rose against a Brexit-beleaguered Pound, with Norway’s economy remaining solid and inflation above Norges Bank’s target of 2%.
However, as global growth slows generally, NOK traders are increasingly concerned that knock-on effects might undermine the trade-reliant Norwegian economy.
Oeystein Olsen, Governor of Norges Bank, recently warned:
‘The [bank’s] policy rate path reflects a trade-off between these conditions. In the event of a severe downturn [in the global economy], we would lower the policy rate.’
With global trade in mind, Norwegian markets will focus on today’s US-China trade talks.
After the US blacklisted 28 Chinese entities “implicated” in alleged human rights abuses, relations between the two super powers were already soured ahead of talks. A further breakdown in negotiations could see the risk-sensitive Norwegian Krone lose some of its gains.
GBP/NOK Exchange Rate Dips, UK Growth Figure Falls below Forecasts
The Pound (GBP) fell following today’s UK growth figure for August, which dropped below forecasts from 0.4% to -0.1%. However, over the last three months the British economy has grown by an unexpected 0.3%, clipping fears for a near-term recession.
Today also saw the UK manufacturing production figure for August fall below forecasts by -0.7%, while the year-on-year figure declined by -1.7%.
In UK political news, Prime Minister Boris Johnson is due to meet with Ireland’s Taoiseach Leo Varadkar to discuss the Irish border issue amidst growing concerns that an October no-deal is inevitable unless an extension to Article 50 can push the deadline into the New Year.
Mr Varadkar said on Wednesday:
‘Part of the difficulty at the moment though is it is the position of the UK government that Northern Ireland must leave the EU customs union and be part of the UK customs union, no matter what the people of Northern Ireland think. That’s their position at the moment, and that’s the one that’s of grave difficulty to us.’
However, UK markets remain jittery after Michael Barnier, the EU’S Chief Brexit Negotiator, said that UK-EU negotiations had come to a standstill.
GBP/NOK Outlook: Sterling Could Fall if Boris Johnson Fails to Secure Brexit Deal
Norwegian Krone traders will be paying close attention to global trade developments for the remainder of this week, with US-China negotiations set to continue in Washington until tomorrow.
Any indication that the world’s two largest economies are at loggerheads would weigh on the trade-reliant Norwegian economy and undermine market confidence in the Krone.
With no UK ecostats due tomorrow, the EU’s formal decision on Boris Johnson’s ‘final’ Brexit deal is likely to drive the GBP/NOK exchange rate. If the EU rejects the proposal and the Prime Minister fails to secure a workable deal, we could see Sterling suffer on heightened no-deal fears.