Pound to Norwegian Krone Exchange Rate Keeps Climbing as Oil Keeps Tumbling
Despite market jitters over the possibility of an interest rate cut from the Bank of England (BoE), the Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate is trending near its best levels all month today.
As the Norwegian Krone (NOK) tumbles, GBP/NOK continues to see strong gains. Following last week’s impressive jump from the interbank level of 11.59 to 11.83, GBP/NOK is still climbing this week and currently trends closer to 11.95.
GBP/NOK has been testing interbank monthly highs today so far. At the time of writing, GBP/NOK trends near the interbank level of 11.98.
the Pound to Norwegian Krone exchange rate could climb even higher if the Bank of England avoids dovishness at today’s anticipated BoE decision, or if coronavirus jitters continue to drive oil prices down.
Pound (GBP) Exchange Rates Steady Ahead of Bank of England (BoE) ‘Knife-Edge’ Decision
Investors are firming on the Pound (GBP) today. Markets await the Bank of England’s (BoE) highly anticipated January policy decision, due early this afternoon.
The Pound’s movement in anticipation of the decision has been mixed. Bets of an interest rate cut are still at around 50%.
According to Jill Ward from Bloomberg, this is one of the most divided markets have been just before a decision:
‘Traders see about a 52% chance of a cut on Thursday, the most divided they’ve ever been this close to a decision under Carney. Bets climbed as high as 70% in the weeks before the announcement, before paring back in the last few days.’
While a Bloomberg survey predicts that rates will be left frozen, other analysts are mixed. Some predict rates will be left frozen while others, such as Rabobank, predict a rate cut today.
Rabobank 2/2: Pricing in the OIS market reflects about 50/50 odds that the Bank will cut the base rate from 0.75% to 0.50%. Meanwhile two-thirds of analysts surveyed by Bloomberg expect the #MPC to keep rates steady, but we are calling for a 25bp cut.
— Francesc Riverola – FXStreet.com (@Francesc_Forex) January 30, 2020
Norwegian Krone (NOK) Exchange Rates Continue to Tumble on Oil Prices
The Norwegian Krone (NOK) is seeing broad weakness this week.
Investors have been selling NOK in reaction to global trade developments. As the Norwegian Krone is a currency correlated to commodity trade, especially prices of oil, falling oil prices have been weighing heavily on the currency.
Oil is Norway’s most lucrative export. Oil prices being hit lower by market anxiety around China’s coronavirus outbreak have hit the Norwegian Krone particularly hard.
On top of weak oil prices pressuring NOK, the currency was hit lower by today’s disappointing Norwegian data.
Norway retail sales came in well below expectations in December. The data printed a shock -2% contraction month-on-month, while the yearly figure fell to -0.7%.
Pound to Norwegian Krone (GBP/NOK) Exchange Rate Could Shift on BoE Decision
The Pound to Norwegian Krone (GBP/NOK) exchange rate has seen solid gains this week so far. However, if today’s Bank of England (BoE) decision is more dovish than expected the pair could shed much of its recent gains.
Today’s BoE decision could be one of this month’s more influential events. The outcome is likely to be a surprise to at least some investors.
If the BoE surprises more bullish investors by cutting UK interest rates and ramping up concerns about Britain’s economic outlook, the Pound (GBP) could tumble.
On the other hand, a more positive tone from the bank about Britain’s outlook would make it easier for GBP/NOK to sustain even further gains.
As for the Norwegian Krone (NOK), recovering oil prices are the best chance the currency has at recovering more of its recent weakness. If coronavirus concerns continue to rise, NOK movement may remain weak.
Due to the Krone’s focus on commodity trade and risk-sentiment, tomorrow’s Norwegian loan and unemployed persons stats are unlikely to have much impact on the Pound to Norwegian Krone (GBP/NOK) exchange rate.