Pound Norwegian Krone (GBP/NOK) Exchange Rate Slides in Spite of Signs of Recovery in CBI Report

Improved Industrial Trends Orders Index Fails to Shore up Pound Norwegian Krone (GBP/NOK) Exchange Rate

An unexpected improvement in October’s CBI industrial trends orders index was not enough to keep the Pound Sterling to Norwegian Krone (GBP/NOK) exchange rate from faltering.

Although the index strengthened from -48 to -34, signalling that momentum within the economy began to recover, the mood towards Pound Sterling (GBP) proved muted.

After the solid rally seen on Wednesday in response to increased hopes of a potential UK-EU trade talks breakthrough the possibility for further Pound gains was limited.

This diminished the positive impact of the CBI report, even as business optimism for the fourth quarter climbed out of negative territory.

Norwegian Krone Shakes off Rising Unemployment Rate

While August’s Norwegian unemployment rate disappointed forecasts, rising from 5.2% to 5.3%, the Norwegian Krone (NOK) still pushed higher against its rival.

Confidence in the health of the Norwegian economy instead picked up thanks to a better-than-expected third quarter industrial confidence index.

As the index clocked in at 1.7, recovering from the previous month’s -9.6, this encouraged investors to favour the Krone once again.

Evidence that the Norwegian economy started to recover from the detrimental impact of the Covid-19 crisis lifted NOK exchange rates, in spite of worries over the global oil market persisting.

Pound Sterling Looks for Support on Steady UK Retail Sales Growth

Although speculation over the possibility of the Bank of England (BoE) adopting negative interest rates diminished this may still weigh on the GBP/NOK exchange rate in the days ahead.

As long as the BoE appears on track to take a more dovish outlook in the coming months this could limit the potential for Pound gains.

Support for the Pound may also pick up on Friday if September’s UK retail sales data impresses investors.

Another solid month of sales growth would suggest that consumers have continued to shake off anxiety over Covid-19 in the short term, encouraging hopes of a stronger third quarter growth rate.

On the other hand, if sales fail to hold onto their previous momentum this could expose the GBP/NOK exchange rate to fresh downside pressure.

Weaker UK PMIs May Expose GBP/NOK Exchange Rate to Fresh Selling

The release of October’s flash UK manufacturing and services PMIs may also drive volatility for the Pound ahead of the weekend.

Markets remain wary of the potential for the economy to show a loss of its earlier recovery momentum, limiting hopes of a stronger fourth quarter of growth.

If either the manufacturing or services PMIs move sharply lower on the month this could weigh heavily on the Pound.

With the possibility of further Covid-19 restrictions and the lingering threat of a potential no-deal scenario any evidence that the economy is already coming under pressure may leave the GBP/NOK exchange rate trending sharply lower.

Louisa Heath

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