Pound Sterling Norwegian Krone (GBP/NOK) Exchange Rate Muted as BoE Slash Rates
UPDATE 11/03/2020: The Pound Sterling Norwegian Krone (GBP/NOK) exchange rate remained muted, leaving the pairing trading at around 12.3909Kr.
The Pound remained flat today after the Bank of England (BoE) joined the growing list of central banks to ease monetary policy.
For the first time since August 2016, the BoE slashed rates by 50 basis points due to increased concerns with the spread of coronavirus.
Sterling sentiment slipped as many investors expected a smaller cut from the bank, and commenting on this, Moh Siong Sim, currency strategist at the Bank of Singapore said:
‘Markets had priced in more than 25 basis points, but not the full extent of 50 basis points.
‘But it’s not a surprise in the sense that the market was kind of expecting the bank to team up with the UK government […] it looks like that 50 basis point rate cut could signal that we could expect something quite substantial from the budget itself.’
Pound Sterling Norwegian Krone (GBP/NOK) Exchange Rate Slumps as Oil Prices Jump
The Pound Sterling Norwegian Krone (GBP/NOK) exchange rate slumped, leaving the pairing trading at around 12.3972Kr.
This morning’s weak Norwegian data was offset by a 5% jump in oil prices. The possibility of further economic stimulus boosted sentiment.
Although, gains were limited as the spread of coronavirus has led to demand concern.
Monday saw oil prices plummet by the largest rout in close to 30 years as coronavirus panic intensified.
Prices were hit after a three-year pact between Saudi Arabia and Russia to limit supply collapsed on Friday.
Meanwhile, sentiment was buoyed slightly after Chinese President Xi Jinping visited the epicenter of the outbreak, Wuhan for the first time since the epidemic began.
Investors eyed the possibility of further economic stimulus from major central banks including the Bank of England (BoE) to help shield the global economy.
However, today’s slight recovery does not mean the current crisis is over, and Societe Generale’s Kit Juckes noted:
‘The expression ‘dead cat bounce’ was invented for mornings like this.’
Norwegian Krone (NOK) Rallies despite Inflation Falling to Seven-and-a-Half Year Low
The Norwegian Krone was able to make gains against the Pound today despite disappointing inflation data.
Norway’s annual inflation rate slumped to a worse-than-expected 0.9% in February from 1.8% in the previous month.
This was the lowest level of annual inflation seen since September 2012 thanks to a softer rise in transport, food and non-alcoholic beverages.
Added to this, the price of housing and utilities slumped faster last month.
Month-on-month, inflation slumped by -0.1%, although this did little to stop NOK rising.
Pound Norwegian Krone Outlook: UK Spring Budget and Oil Prices in Focus
Looking ahead, the Pound (GBP) could make some tentative gains against the Norwegian Krone (NOK) ahead of the UK Spring Budget.
If Chancellor Rishi Sunak announces additional spending and gives clues on potential stimulus from the Bank of England (BoE) due to the spread of coronavirus, Sterling will edge higher.
However, if oil prices continue to recover it could provide an upswing of support for the Krone.
If oil prices continue to rise this week after ‘Black Monday’, the Pound Norwegian Krone (GBP/NOK) exchange rate could be left largely flat.