GBP/NOK Exchange Rate Buoyed as UK Prepares for 12 December Election
The Pound to Norwegian Krone (GBP/NOK) exchange rate is trading higher this morning as markets react to parliament’s decision to call a general election for 12 December.
At the time of writing the GBP/NOK exchange rate is trading at around NOK11.8923, just shy of the post EU-referendum high of NOK11.9679 stuck on Tuesday.
Pound (GBP) Faces Volatility as UK Election to be dominated by Uncertainty
While the Pound (GBP) may currently be holding its ground following a vote by MPs to trigger an early election, the uncertain nature of the election means this is unlikely to last.
The election has been sold as a way to break the current deadlock in Parliament and finally move forward with Brexit.
However many observers have expressed concerns that the election could prove inconclusive, leaving markets not the wiser as to where we will be by the new Brexit deadline on 31 January.
Our UK general election poll tracker is live: https://t.co/ReMRjIyIrC pic.twitter.com/oBt5NKUbe8
— FT Data (@ftdata) October 29, 2019
Current polls put the Conservative ahead of Labour by around 10 points, but investors will be aware the two parties were in a similar position before the 2017 election, which ended in a hung parliament.
Analysts also warn the upcoming election will effectively be an EU referendum in disguise, and as the last three years have shown us, whenever Brexit is involved uncertainty is sure to follow.
Lacklustre Retail Sales adds to Norwegian Krone’s (NOK) Selling Bias
The Norwegian Krone (NOK) is on the back foot this morning in response some disappointing domestic data.
According to data published by Statistics Norway, domestic retail sales contracted by 0.1% in September, missing expectations of a 0.2% expansion.
This has fed into a the persistent selling bias that has plagued the Krone in recent months, in spite of the Norges Bank being the most hawkish of all the G10 central banks.
Jane Foley, senior FX strategist at Rabobank explains:
‘In text book terms, the solid economic backdrop in Norway combined with the higher interest rate differentials on offer this year could be associated with a stronger exchange rate. However, the performance of NOK has been the opposite.
‘How NOK performs in the months ahead could have more to do with the outlook for global growth and the relative position of the oil price than Norges Bank policy.’
GBP/NOK Exchange Rate Forecast: UK Manufacturing PMI to Influence Sterling?
With Brexit now on the backburner until January and election campaigning not set to officially get underway until next week, there may be some room for UK data to start influencing the Pound to Norwegian Krone (GBP/NOK) exchange rate again.
As a result we may see the publication of the UK’s manufacturing PMI on Friday drag on Sterling as economists forecast the recent contraction in the UK’s factory sector will have widened again in October.
Norway will also publish its manufacturing PMI at the end of the week, with the Krone potentially facing some pressure as Norwegian factory growth is expected to come close to stagnating this month.