Pound Norwegian Krone : GBP/NOK Rate Struggles to Break Market Support as Norwegian Policy Makers Continue with Dovish Rhetoric

Modified: Thursday, 10 March 2011 09:06 BST - Written by John Cameron

STORY LINK Pound Norwegian Krone : GBP/NOK Rate Struggles to Break Market Support as Norwegian Policy Makers Continue with Dovish Rhetoric

The Pound Norwegian Krone Rate (GBP/NOK) is 9.0530

With oil prices remaining close to their near-term highs and gaining on the day today, you might expect the Norwegian Krone to have made strident gains in the currency markets. Although the Krone has performed well against Sterling since the Arab crisis broke, the GBP/NOK rate has failed to significantly break down through the 9.0000 resistance level which it came close to in the last week of October, 2010 and the first week of January, 2011. GBP/NOK traded below 9.0000 today, but rejected the level and was trading back above 9.0000 at the European close. Any further upside for the pair would see 9.0000 established as a key support in the market.

The reason that the Krone has only made moderate gains during the oil price rally is the tone of recent statements made by Norwegian policy-makers. Finance Minister Sigbjoern Johnsen has made a series of comments in recent weeks which have held back the Krone. Most recently, Sigbjoern stated that the Norwegian government was ‘concerned’ about the effects that the strong Krone would have on Norwegian businesses. He went on to comment that Norway needed a ‘very restrictive’ finance policy in order to limit further Krone gains. Such a policy would entail keeping government spending under close control and perhaps hiking taxes.

Meanwhile in the UK, this morning’s monthly industrial production figure will be closely watched for further evidence that the UK manufacturing base is strengthening. The big risk event of the day comes at 1200 GMT with the Bank of England’s interest rate decision for March. Futures markets are pricing in a 15% chance of a rise, so if rates remain at 0.50%, as analysts expect, then there could be some near-term selling pressure on Sterling which could see GBP/NOK breaking down through 9.0000.

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