Lack of Brexit Breakthrough Drags on Pound Norwegian Krone (GBP/NOK) Exchange Rate
The Pound to Norwegian Krone (GBP/NOK) exchange rate was unable to hold onto a positive footing as fears of a potential no-deal Brexit scenario mounted sharply.
As a dinner meeting in Brussels between Boris Johnson and Ursula von der Leyen failed to deliver the breakthrough that markets had pinned their hopes on the mood towards Pound Sterling (GBP) soured.
Although the pair agreed to extend Brexit trade talks until Sunday this was not enough to offer investors any particular sense of encouragement, with an agreement looking increasingly unlikely.
Support for GBP exchange rates also weakened in the wake of October’s monthly UK gross domestic product reading, which saw growth momentum slow from 1.1% to just 0.4%.
All in all, this painted a discouraging picture of the economic outlook, leaving the Pound exposed to a fresh wave of selling.
Softer Inflation Fails to Drive Down Norwegian Krone
While the Norwegian inflation rate fell short of forecast this was not enough to offer the GBP/NOK exchange rate any rallying point, meanwhile.
As the headline inflation rate dropped from 1.7% to 0.7% on the year this appeared to increase the likelihood of greater Norges Bank dovishness in the months ahead.
With the monthly inflation rate turning negative at -0.7% the case for looser monetary policy seemed to pick up, putting some pressure on the Norwegian Krone (NOK).
However, in the face of the latest bout of Brexit anxiety the Krone was still able to hold onto a stronger footing against the softening Pound.
Growing Doubts over UK Outlook Set to Keep GBP/NOK Exchange Rate on Back Foot
Unless markets see signs of progress towards a Brexit deal before Sunday the mood towards the Pound looks set to remain muted at best.
With UK ports already facing disruption even before the end of the transition period fears of greater damage to the economy are likely to mount.
As the economy has already shown signs of losing momentum in the final months of the year the risk of an even greater post-Brexit slowdown could see the GBP/NOK exchange rate trending sharply lower.
On the other hand, if the UK and EU can progress towards a final deal this may encourage the Pound to make a strong rally across the board before the week is done.
Norwegian Krone Looks for Support from Bullish Oil Prices
Any deterioration in general market risk appetite could put pressure on the Norwegian Krone, meanwhile.
As long as markets maintain a sense of optimism over progress towards a widespread Covid-19 vaccine this should keep a floor under NOK exchange rates, though.
However, if oil prices are unable to maintain their bullish momentum in the days ahead this could expose the Norwegian Krone to some renewed selling pressure.
Given the significant role that the oil industry plays in the Norwegian economy any significant dip in prices could offer the GBP/NOK exchange rate some renewed traction.