BoE and ‘Hawkish’ Norges Bank Sends Pound Norwegian Krone (GBP/NOK) Exchange Rate Lower

Pound Sterling Norwegian Krone (GBP/NOK) Exchange Rate Slumps on Hawkish Norges Bank

UPDATE: The Pound Sterling Norwegian Krone (GBP/NOK) exchange rate continued to slump by around -1% on Thursday afternoon. This left the pairing trading at around 11.8385Kr.

The Norwegian Krone was a star performer during today’s session. It was the biggest mover amongst major currencies after an upbeat Norges Bank.

Adrian Owens, currency and fixed income portfolio manager at GAM noted the crown ‘seems to be ticking pretty much all the boxes at the moment’ and added:

‘Numbers are coming out better in Norway and the central bank [is] acknowledging this and becoming more hawkish’.

Meanwhile, Sterling remained under pressure after the Bank of England (BoE) increased its bond-buying programme by £100 billion as expected. Britain’s central bank also left interest rates at 0.1%.

Pound Sterling Norwegian Krone (GBP/NOK) Exchange Rate Slides as Norges Bank Upwardly Revises Growth Forecasts

The Pound Sterling Norwegian Krone (GBP/NOK) exchange rate slumped by around -1% on Thursday. This left the pairing trading at around 11.8440Kr.

The Norwegian Krone rose against the Pound today after the country’s central bank left interest rates at zero.

Norges Bank left rates on hold as expected. The bank also added that economic prospects had improved more than expected in recent weeks, buoying NOK.

Since March, the bank has slashed rates three times in order to cushion the economy from the effects of the coronavirus crisis and plummeting oil prices.

In a statement from the bank after announcing its unanimous decision, Norges Bank said:

‘Since the monetary policy meeting in May, activity has picked up faster than expected.

‘The policy rate forecast implies a rate at the current level over the next couple of years, followed by a gradual rise as economic conditions normalise.’

The bank’s outlook also brightened, with the mainland economy which excludes oil and gas output, expected to contract by -3.5% this year. This is an improvement on May’s forecast of a -5.2% decline which offered the Krone support.

Added to this, Norges Bank has upwardly revised its growth expectations for 2021. It expects 3.7% growth compared to last month’s expectation of just 3% growth.

Sterling (GBP) Tumbles Ahead of BoE Meeting

Meanwhile, the Pound (GBP) slumped against the Norwegian Krone ahead of today’s Bank of England’s (BoE) latest monetary policy meeting.

The bank is expected to increase its £100 billion bond-buying programme. Although, there is some speculation the BoE will offer a larger increase. This is due to Britain’s central bank already spending most of its £200 billion firepower it gave itself in March.

Bond-buying seems to be the bank’s most powerful option to help with the economy which suffered a record -25% contraction in March and April.

The BoE is also trying to push inflation back towards its 2% target after Wednesday’s data showed the Consumer Price Index slowed to 0.5% in May.

The threat of negative rates also weighed on Sterling as the bank’s Governor, Andrew Bailey said policymakers would consider taking rates below zero for the first time. However, this review is expected to take time.

Although, investors largely expect policymakers to reaffirm its earlier message that the BoE is ready to offer the economy further support if needed.

Pound Norwegian Krone Outlook: Will the BoE Meeting Send GPB Lower?

Looking to this afternoon, the Pound (GBP) could suffer further losses against the Norwegian Krone (NOK) following the Bank of England’s (BoE) monetary policy meeting.

If the bank is overly dovish about the outlook for the British economy and focuses on recent weak data it will dampen Sterling sentiment.

Meanwhile, GBP could edge lower against the Krone if data shows the UK’s retail sector continues to struggle.

Retail sales statistics could show British shoppers are increasingly downbeat and are spending considerably less compared to last year. This will send the Pound Norwegian Krone (GBP/NOK) exchange rate lower.

Millie Empson

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