Pound Sterling Norwegian Krone (GBP/NOK) Exchange Rate Jumps as Norway’s Economy Cools
The Pound Sterling Norwegian Krone (GBP/NOK) exchange rate edged higher on Friday, leaving the pairing trading at around 11.9905Kr.
The Norwegian Krone slumped against Sterling after data revealed the country’s economy cooled more than forecast during the final quarter of 2019.
Norway’s GDP confirmed signs of weakness and put pressure on the currency. Statistics Norway reported the economy, excluding oil, grew by just 0.2%.
Added to this, third-quarter growth was downwardly revised to 0.6%.
While the economy has been able to defy weakness that has been seen in other major European economies, recent signs indicate the country is beginning to bend to weakness abroad.
NOK remained under pressure as Norges Bank raised rates three times in 2019, and the country’s oil industry has signaled its recent investment boom is going to gradually end.
Commenting on this morning’s data, Handelsbanken wrote:
‘If anything, this makes us even more certain that interest rates have peaked.’
Norwegian Krone Falls as Oil Producers Cut Output
The Norwegian Krone slipped despite oil prices rising higher on Friday after Russia stated it would support OPEC’s recommendation.
OPEC and other oil producers are going to cut output further as the spread of the coronavirus epidemic sparked a decrease in demand for crude oil.
Overall, oil prices have fallen by more than 20% since the outbreak of Wuhan coronavirus. This likely left the Krone under pressure as the country is a significant oil exporter.
Commenting on this, ING economists wrote:
‘There is still plenty of uncertainty around the global balance, with it unknown how demand will evolve in coming months as a result of the coronavirus.’
Pound (GBP) Rises despite Johnson’s Tough Stance on EU
The Pound was able to make gains on the Norwegian Krone despite investors remaining cautious about upcoming UK-EU trade negotiations.
Markets remained cautious over the week as Prime Minister Boris Johnson took a tough stance against the European Union.
Commenting on this week’s events, Nomura FX strategist, Jordan Rochester stated:
‘It’s very hard to square the circle. We’ve gone from a place where the market expected common ground to be found to a place of brinkmanship again.’
However, weak Norwegian data offset market worries about the UK and EU agreeing upon a deal before the end of the transitionary period.
Pound Norwegian Krone: Norwegian Inflation in Focus
Looking ahead to Monday, the Norwegian Krone (NOK) could extend its slump against the Pound (GBP).
If Norwegian inflation data disappoints in January, the Krone will slide.
Meanwhile, the pairing could be left flat if traders continue to fret about UK-EU trade discussions.
If markets price in a lower chance of a trade agreement being secured before the end of the transition period, the Pound Norwegian Krone (GBP/NOK) exchange rate will remain muted.