GBP/NOK Exchange Rate Rangebound Despite Gloomy Outlook for Norwegian Economy
The Pound to Norwegian Krone (GBP/NOK) exchange rate held steady today after Norwegian retail sales report for April beat forecasts and rose from -0.9% to 4.8%. The pairing is currently trading around 12.18kr.
The Norwegian Krone (NOK) benefited from the unexpected increase in Norway’s retail sales.
Statistics Norway (SSB) commented on the data:
‘The strong growth in retail trade suggest that Norwegians have changed their consumption pattern in the direction of spending less on services, and more on certain retail goods.’
Today also saw the release of March’s Norwegian Labour Force Survey, which fell below forecasts to 3.6%. Although better than April’s 3.5% this was not enough to buoy the Norwegian Krone (NOK).
However, after Norway’s biggest bank, Nordea, predicted that the Nordic economy could contract by as much as 6% this year, Norwegian Krone investors are remaining cautious.
Analysts at Reuters explain:
‘With much of the global economy in limbo amid the pandemic, the export-dependent Nordic nations have seen a spike in unemployment that is expected to linger in the coming year, Nordea’s quarterly Economic Outlook report showed.’
‘The decline in gross domestic product in 2020 is expected to range from 5% in Denmark to 6% in Norway and Sweden and 7% in Finland, while next year’s growth is forecast at 4% in each of the four nations.’
Pound (GBP) Steady as UK Government Expected to Reopen Economy in June
The Pound (GBP) held steady against NOK today. Andy Haldane, the Bank of England’s (BoE) economist said that UK economic data is ‘a shade better’ than forecasts.
As a result, Sterling traders have become more optimistic about the British economy going forward.
Mr. Haldane described the British economy’s recovery next year as relatively rapid V-shaped:
‘This is perhaps still a V but perhaps a fairly lopsided V. The risks to that probably … lie to the downside rather than the up and as I say, a rather more protracted recovery even than the one that I have mentioned.’
Meanwhile, Sterling’s gains are being held back by a divided Tory Part following adviser Dominic Cummings’ lockdown trip. Consequently, political uncertainty in the UK is holding back some of the Pound’s gains.
However, some Pound (GBP) investors have become more optimistic about the British economy as the UK Government is planning to reopen its economy in June.
Brexit hopes have also resurfaced after the EU showed willingness to make a concession on UK fishing rights. With the UK-EU set to engage in trad talks next month, this has improved the mood around the possibility of a Brexit trade deal.
GBP/NOK Forecast: Could UK Political Uncertainties Weigh Down Sterling This Week?
The Norwegian Krone (NOK) will remain sensitive to global trade developments this week. However, any signs US-China tensions sparking up would weaken the currency on fears for Norway’s export-reliant economy.
However, if the global situation continues to improve we could see the Norwegian Krone buoyed on hopes of increased trade.
Meanwhile, there are few UK economic data releases this week.
The GBP/NOK exchange rate will be driven by Britain’s coronavirus situation and political developments. Any further signs of interparty division over Dominic Cummings’ role in the government could weaken Sterling on rising political uncertainty.