GBP/NOK Exchange Rate Rangebound, Norwegian Trade Balance Improves in December
The Pound Norwegian Krone (GBP/NOK) is rangebound today, with the pairing currently trading around 11.551kr after December’s Norwegian trade balance rose from 18.8 billion to 25.6 billion.
The report provided little uplift for the Norwegian Krone (NOK), however, with today’s US-China ‘phase one’ trade deal remaining firmly in focus. This follows recent comment from the Norwegian Finance Minister, Siv Jensen, who said that the trade war between the two superpowers was the biggest uncertainty facing the Norwegian economy.
The Norwegian Krone is particularly sensitive to global trade developments, being as its economy is so reliant on foreign trade and the sale of natural resources such as North Sea oil.
Weijian Shan, an Economist and Chairman of the PAG Group based in Hong Kong, was more sceptical about the US-China trade agreement, saying:
‘Beyond the tariff-removal accomplishments, this ‘victory’ rings hollow for both sides. The deal from December does not mark a major breakthrough, nor does it come close to fixing the most contentious issues that separate the two countries.’
‘The US must decide what it wants: access to the Chinese market with better prices for its consumers or the containment of China’s rise at all costs. Washington simply cannot have it both ways.’
As a result, we could see the NOK/GBP exchange rate fall today if the US-China ‘phase one’ trade deal fails to draw agreement between Beijing and Washington.
GBP/NOK Exchange Rate Steadies despite Rising BoE Bank Rate Cut Fears for January
The Pound (GBP) failed to make much headway on the Norwegian currency today after UK inflation fell to its lowest in three years in December, with the Consumer Price Index falling from November’s 1.5% to 1.3%.
Mellissa Davies, an Economist at the stockbroker Redburn, commented:
‘Very soft UK inflation data for December leaves the door wide open for a Bank of England rate cut on 30 January’.
Today also saw Michael Saunders, a member of the Bank of England’s Monetary Policy Committee, repeat that he would back a vote for the central bank to cut its interest rates as early as this month.
Mr Saunders commented:
‘It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the 2% inflation target’.
As a result, the Sterling has remained somewhat subdued against many of its many major competitors as fears for the UK economy post-Brexit persist to haunt British markets.
GBP/NOK Outlook: Could Sterling Fall on Further Hints of BoE Stimulus Measures?
The Norwegian Krone will remain sensitive to global political and economic developments around the US-China trade deal this week. Although we could likely see the NOK/GBP exchange rate begin to rise if the two superpowers concede on ‘phase one’ of the deal.
Sterling traders will be bracing for tomorrow’s Bank of England Credit Conditions Survey for the fourth quarter, with any further signs of fiscal tightening this month being on the agenda weakening the GBP/NOK exchange rate.