Pound Norwegian Krone (GBP/NOK) Exchange Rate Falls as Norwegian Core CPI Rises

Pound Norwegian Krone (GBP/NOK) Exchange Rate Slides as Norwegian Core CPI Ticks Higher

The Pound Norwegian Krone (GBP/NOK) exchange rate is dropping today, as Norwegian core inflation unexpectedly ticked upward.

At the time of writing, GBP/NOK traded at around NOK13.2574, a fall of just under 0.6% from the morning’s opening rates.

Norwegian Krone (NOK) Soars as Core Inflation Heats Up

The Norwegian Krone (NOK) is surging this afternoon, as Norwegian core inflation printed above forecasts.

While headline inflation cooled to 6.4% in April, core inflation increased to 6.3% from 6.2%. Remaining significantly above Norges Bank’s target rate, this appears to have sparked elevated bets on further tightening.

Furthermore, Norges Bank essentially promised another rate hike at their June meeting as outlined in their latest conduct of monetary policy report.

Norges Bank Governor Ida Wolden Bache stated:

‘The policy rate was raised quickly, and in autumn 2022, the rate reached a level where it likely began to have a tightening effect on the economy.  At its meeting last week, the Monetary Policy and Financial Stability Committee raised the policy rate to 3.25 percent and will most likely raise the rate further in June.’

As the bank has established a need to control inflation before it becomes ingrained, today’s data will likely provide further impetus.

Elsewhere, global risk appetite appears to be tentatively elevated. As one of the most risk-sensitive currencies in G10 territories, NOK may be receiving further tailwinds from the modestly cheery mood.

Pound (GBP) Cushioned by BoE Rate Hike Bets

The Pound (GBP) is being cushioned by elevated rate hike bets today, ahead of tomorrow’s interest rate decision from the Bank of England (BoE).

While a 25bps hike is practically priced in, questions remain over the nature of the BoE’s forward guidance.

If the BoE takes a hawkish stance, in contrary to the last decision, GBP could climb further. Economists have begun to expect an additional hike in June, which may be preventing Sterling from further losses.

Elsewhere, a lack of significant data releases may be weighing on Sterling. With little information for GBP investors to work with, sentiment appears to be on the wane as we move through the European session.

GBP/NOK Exchange Rate Forecast: UK GDP to Boost GBP?

Looking ahead beyond tomorrow’s rate hike decision from the BoE, Friday sees the publication of the latest UK GDP data.

Economists have forecast a first-quarter expansion of 0.1% which may strengthen the Pound. If this prints accurately, it may reflect that the UK economy has managed to dodge a recession in Q1.

For the Norwegian Krone, the core catalyst of movement may come from Friday’s GDP print. Economists are currently forecasting an expansion of 0.2% on a quarterly basis in Q1.

If this prints accurately, the Krone could enjoy support as it indicates resilience in the Norwegian economy. As the Norges Bank is taking a hawkish stance on inflation, it may spark further rate hike bets.

John Mulcahey

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