GBP/NOK Exchange Rate Edges Higher, Easing US-Iran Tensions Weighs on European Oil Prices
The Pound Norwegian Krone (GBP/NOK) exchange rose to around 11.623kr today, after Norway’s month-on-month inflation figure fell unexpectedly from 0.3% to -0.3%, falling below the Norge’s bank’s expectations for the first time since October 2018.
Nordea Bank said in its research report:
‘Today’s inflation figure is the first since Norges Bank published its latest Monetary Policy Report. It is therefore too early to draw strong conclusions, but today’s inflation figure should not significantly affect the central bank’s interest rate outlook. In sum, this is consistent with our view that Norges Bank will remain on hold for the foreseeable future.’
The Norwegian Krone (NOK) struggled against the Pound (GBP) as easing tensions between the US and Iran have resulted in the dwindling prices of European oil, one of Norway’s major commodities.
The market company, DNB Markets, was, however, upbeat in its assessment of the Norwegian Krone in the short-term, stating:
‘While risk sentiment improved late last year, we expect bouts of risk aversion and [financial] volatility to pick up from recent record lows, and be in the NOK’s disfavour’.
GBP/NOK Exchange Rate Rises as Brexit Bill Passes through Parliament
The Pound (GBP) edged higher against the Norwegian currency after Prime Minister Boris Johnson’s Brexit Withdrawal Agreement Bill passed through Parliament in yesterday’s historic vote, which saw the Bill pass by a comfortable majority of 99.
However, Sterling traders are now waiting for the Bill to pass through the House of Lords, where it will receive a more thorough examination. Any further obstacles to the Bill’s passing would prove Pound-negative as Brexit uncertainty would be quick to return.
Meanwhile, yesterday’s dovish speech by Mark Carney, the Bank of England’s Governor, is continuing to haunt British markets.
Mr Carney commented:
‘If evidence builds that the weakness in activity could persist, risk-management considerations would favour a relatively prompt response.’
As a result, Pound investors are becoming increasingly concerned that the central bank could cut its interest rates in the near-term. And with post-Brexit soon becoming a reality after 31st January, UK markets are remaining jittery on the increased likelihood of a weaker economy.
GBP/NOK Outlook: Could Sterling Sink on Further BoE Rate Cut Fears?
Pound (GBP) traders will be awaiting Monday’s publication of November’s UK industrial production figure, which is expected to fall from 0.1% to -0.2%.
These will also be followed by the final UK GDP figure for November, which is forecast to remain flat at 0%. As a result, we could see Sterling sink as it provides further incentive for the central bank to cut its interest rate this year.
Norwegian Krone (NOK) investors will be awaiting Tuesday’s release of December’s trade balance, with any signs of improving providing a boost for the NOK/GBP exchange rate.