Pound Norwegian Krone (GBP/NOK) Exchange Rate Slumps from Near Three-Year High

Pound Norwegian Krone Exchange Rate Retreats from Recent Highs

The Pound Norwegian Krone (GBP/NOK) exchange rate is trending lower this morning. The pullback sees GBP/NOK retreat from the near three-year high struck at the start of the week.

At the time of writing the GBP/NOK exchange rate is trading at around NOK12.9634. Down roughly 0.7% from this morning’s opening rate.

Norwegian Krone (NOK) Finds Relief amid Strengthening Oil Prices

The Norwegian Krone (NOK) is ticking higher this morning, with the commodity-linked currency firming in tandem with oil prices.

Brent crude climbed over 1% at the start of today’s session. After falling below $72 a barrel on Monday amid the recent turmoil in the banking sector.

This has offered the Krone some much needed respite, after facing relentless selling pressure in recent weeks. The NOK selling bias has seen the GBP/NOK exchange rate climb almost 5% in the past month.

The bulk of these losses appear linked to market expectations that Norges Bank will leave interest rates on hold following its March policy meeting, despite analysts forecasting a modest 25bps increase.

Economists at Commerzbank suggest:

‘It would be disastrous not to hike the key rate further in view of the broad-based inflation pressure, even less so signalling an end of the rate cycle.’

Elsewhere, uncertain economic conditions remain a hurdle for the Krone and could see the currency struggle to consolidate today’s gains.

Pound (GBP) Muted ahead of BoE Rate Decision

The Pound (GBP) is subdued this morning as GBP investors brace for the Bank of England’s (BoE) latest interest rate decision.

The BoE was previously forecast to raise interest rates by 25bps to 4.25% when it concludes its March policy meeting later this week.

However, recent events have cast some doubt over the BoE’s next move. Some GBP investors are speculating the BoE might leave rates on hold in response to the banking sector turmoil. Such a move would likely send the Pound sharply lower.

Even if the BoE follows through with a 25bps hike, Sterling may be vulnerable to losses if the bank’s forward guidance indicates its hiking cycle has come to an end.

The BoE will announce its rate decision on Thursday as 12:00 GMT.

Pound Norwegian Krone Exchange Rate Forecast: Softer UK Inflation to Drag on Sterling?

The Pound Norwegian Krone (GBP/NOK) exchange rate could tick lower again on Wednesday with the publication of the UK’s consumer price index.

February’s CPI figures are expected to report UK inflation slowed from 10.1% to 9.9%. While inflation will remain well above the BoE’s target rate, this will be the first drop below double digits in six months. The drop below the psychological level could sap Sterling sentiment.

At the same time, movement in the Krone is likely to be limited on Wednesday, with NOK investors reluctant to make any bullish bets ahead of Norges Bank’s rate decision.

Matthew Andrews

Contact Matthew Andrews

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