GBP NOK Exchange Rate Struggling to Advance as Oil Prices Remain Strong
The Pound Sterling to Norwegian Krone (GBP NOK) exchange rate has attempted to rebound this week. However, while Brexit hopes are higher, strong prices of oil have been supporting the oil-correlated Norwegian Krone (NOK).
Since markets opened this week at the interbank level of 11.66, GBP/NOK has been trending with a largely upside bias.
GBP/NOK has been volatile though, as the Brexit hopes supporting the Pound (GBP) are limited. At the time of writing, GBP/NOK isn’t trending much higher than the week’s opening levels. GBP/NOK currently trends in the interbank region of 11.68.
If there are Brexit developments in the coming sessions though, the Pound to Norwegian Krone exchange rate could see a surge in demand.
Pound (GBP) Exchange Rates Buoyed by Hopes of Progress in Brexit Negotiations
Pound exchange rates have been stronger this week, amid hopes that the UK and EU are getting closer to reaching a deal on Brexit.
Progress has been slow, but there has notably still been progress. This is keeping investors optimistic that a deal is more likely to be reached in the coming week than no deal.
In this final stretch of talks, transparency & unity are important as ever: Debriefed @Europarl_EN Conference of Presidents this morning on ???? negotiations.
Good progress, but last stumbling blocks remain. We will only sign a deal protecting EU interests & principles. pic.twitter.com/L25PWCKYAG
— Michel Barnier (@MichelBarnier) December 17, 2020
Despite this though, the Pound is struggling to sustain gains against the Norwegian Krone. The possibility of a no-deal Brexit remains.
Norwegian Krone (NOK) Exchange Rates Boosted as Oil Prices Hit Multi-Month Best
Prices of oil hit their best levels in nine months this morning. As oil is a big commodity for Norway, the Norwegian Krone is often correlated to movement in oil prices.
Strength in oil is keeping the Norwegian Krone strong today.
On top of this, the Norwegian Krone is being supported by a slightly hawkish shift in tone from the Norges Bank.
Norway’s central bank signalled today that its next interest rate hike could happen in the first quarter of 2022, rather than the first half as previously suggested. Kjetil Olsen, Chief Economist at Nordea, said:
‘This is a message on the hawkish side
They are bringing a potential rate hike forward by about half a year as the vaccination rollout could lead to a faster recovery.’
Pound Norwegian Krone (GBP NOK) Exchange Rate Awaits Brexit Deal
Investors may not have much reason to buy the Pound again unless a Brexit deal is actually reached soon.
The possibility of a no-deal Brexit persists, and if talks collapse in the coming sessions then the Pound could plummet. Sterling would fall especially far if the Norwegian Krone is being supported by oil prices.
Of course, GBP/NOK is more likely to sustain a solid recovery if a Brexit deal is reached soon. It would mean one of the biggest downside risks of the Pound outlook had been largely removed.
While Sterling’s movement will be dominated by Brexit, the Norwegian Krone’s own strength may be limited as well.
If oil prices slip back from their recent highs, the Norwegian Krone may fall in profit taking. This would make it easier for GBP/NOK to recover.
Norwegian unemployed persons data due tomorrow could give the Krone an extra boost and weigh on the Pound to Norwegian Krone exchange rate tomorrow if it impresses investors though.