GBP/NOK Exchange Rate Rangebound, COVID-19 Fears Hold Back Norwegian Krone
The Pound to Norwegian Krone (GBP/NOK) exchange rate held steady this morning, with the pairing currently fluctuating around 12.020kr in spite of January’s Norwegian manufacturing output rising unexpectedly from 0% to 0.4%.
However, the global coronavirus outbreak is leaving Norwegian Krone (NOK) investors jittery as Norway’s economy is particularly sensitive to global business cycles and impacts on the supply chain.
The Confederation of Norwegian Enterprise (NHO) said in their statement:
‘Norway has a small, open economy. That means that a shock to the world economy can have a huge effect on us here at home. The virus outbreak in China is an example of just such a shock.’
The Norwegian Krone (NOK) has remained subdued against its peers today as investors remain wary of currencies closely correlated to developments in China. This is due to fears that the Chinese economy, which is the second-largest in the world, could substantially shrink in the first quarter.
Pound (GBP) Steadies as BoE Rate Cut Fears Ease Off
The Pound (GBP) has found support from a shift in rate cut expectations from the Bank of England (BoE) after the incoming Governor of the BoE Andrew Bailey said that a rate cut from the bank was by no means guaranteed.
Mr Bailey commented:
‘I think what we need frankly is more evidence than we have at the moment, as to exactly how this is feeding through. We have got a building picture of evidence. The Bank of England is … working extremely hard on it. I have been engaged on it this week, and I think then we can reach our judgment.’
The GBP/NOK exchange rate has also benefited from comments from Michel Barnier, the EU’s Chief Brexit negotiator. Barnier said that post-Brexit trade talks between the UK and the EU had got off to a ‘constructive’ start this week.
Today also saw the UK Halifax House Prices report beat forecasts and rise by 0.3% in January.
Russell Galley, Managing Director of Halifax, was cautious in his assessment of the report, saying:
‘Looking ahead, there are a number of risks, including the potential impact of coronavirus, which continue to exert pressure on the economy and we wait to see how these will affect housing market sentiment later in the year.’
GBP/NOK Forecast: Weak Retail Sales Could See Sterling Tumble
Pound (GBP) investors will be looking ahead to Monday’s release of the UK BRC Like-For-Like Retail Sales report for February, which is expected to sink by -0.2%. As a result, we could see the GBP/NOK exchange rate begin to fall as the UK’s economic outlook darkens.
Looking ahead to Tuesday, the UK’s manufacturing sector looks likely to be beset by weak reports for January. If industrial production and manufacturing production data confirms consensus we could see market appeal in the Pound begin to slip.
Norwegian Krone (NOK) traders will be keeping a close eye on global coronavirus developments. Any further spread of the virus would weaken the global trade-reliant Norwegian economy and prove NOK-negative.