GBP/NOK Exchange Rate Falls as UK PMIs Plummet to Record Lows
The Pound to Norwegian Krone (GBP/NOK) exchange rate fell by -0.9% today after April’s flash UK Markit Services PMI plummeted from 34.5 to a worse-than-expected 12.3. The pairing is currently trading around 13.16kr.
The preliminary UK’s Manufacturing PMI report for April below even the pessimistic forecasts, with the figure sinking deeper into contraction territory from 47.8 to 32.9.
Duncan Brock, the Group Director at CIPS, was notably downbeat in his analysis:
‘There’s nothing to applaud in this month’s results. Even the slight rise in optimism from last month’s record low feels like a blip to what the economy is facing in 2020. The figures for April could not be more worrying but as we may not have reached pandemic peak yet, there’s much more bad news to come.’
Today also saw the release of March’s UK Public Sector Net Borrowing figure which rose from £0.065 billion to a higher-than-expected £2.325 billion. Owing to the Covid-19 crisis, the Government’s spending sent the deficit soaring.
Borrowing in the full 2019 to 2020 financial year was £48.7 billion, £9.3 billion more than the previous year and £1.3 billion more than the Office for Budget Responsibility forecast https://t.co/m3MobvO6PZ pic.twitter.com/B8ICxYdB2T
— Office for National Statistics (ONS) (@ONS) April 23, 2020
The Office for National Statistics (ONS) added:
‘The coronavirus (Covid-19) pandemic is expected to have a significant impact on the UK public sector finances. These effects will arise from both the introduction of public health measures and from new Government policies to support businesses and individuals.’
Norwegian Krone (NOK) Rises Despite Lack of Expansion in Norway’s Labour Market
The Norwegian Krone (NOK) edged higher this morning despite Norway’s Labour Force Survey for February falling 3.7% to 3.5% and showing a lack of expansion in the Norwegian labour market.
However, some of the Norwegian Krone’s gains are being held back by rising anxieties over the nation’s oil production cuts.
Jim House, the Chief Executive of Neptune Energy, a company with production in both British and Norwegian waters, commented:
‘We have gone through commodity swings and cycles of that nature, but this one is different. We have never seen a world completely shut down.’
With most of Norway’s economy heavily reliant on oil and gas production, which accounts for over 20% of its economy, NOK investors are becoming increasingly anxious over the drop in oil prices due to the coronavirus pandemic.
The price of Brent crude has fallen by -70% this year, with barrels costing little over $20 per barrel. Consequently, the undeveloped fields in the North Sea may no longer be viable should prices continue to fall.
GBP/NOK Forecast: Could Plummeting UK Retail Sales Also Drag on Sterling?
Pound (GBP) investors will be awaiting tomorrow’s release of the UK Retail Sales report for March. If this significantly falls below its already pessimistic forecast of a -4% drop, then we could see Sterling fall further against the Norwegian Krone.
Norwegian Krone (NOK) investors will be keeping a close eye on oil prices this week. However, any further gluts or drops in oil prices would drag down the oil-dependent NOK.
The GBP/NOK exchange rate will likely remain subdued, however, as the UK has yet to officially see its coronavirus peak. As a result, the outlook for the British economy and therefore Sterling continues to look bleak.