January 12, 2017 - Written by James Fuller
STORY LINK Oil Glut Worries Sends Pound Norwegian Krone Exchange Rate Higher
The Pound to Norwegian Krone exchange rate hit new weekly lows on Friday afternoon despite oil prices dropped from their best levels on concerns that OPEC’s planned oil output cuts would not be enough to stimulate long-term price increases.
This left GBP/NOK close to 10.3399 – its lowest level since before the US election in November 2016. The pair could recover from its worst levels in the next week if oil prices continue to slip.
[Previously Updated 12/01/2017]
It has been a volatile week of trading for the Pound (GBP) thanks to renewed speculation over the government’s approach to Brexit and the possibility of the UK losing its current level of access to the single market.
Strong UK Retail Results Boosted GBP NOK Exchange Rate
In a positive sign for the UK economy the NIESR gross domestic product for the three months to December showed solid growth of 0.5%, suggesting continued economic resilience.
Investors were further encouraged on Thursday by a raft of strong performances from UK retailers, which indicated that consumer confidence had remained strong throughout the Christmas trading season.
While this news boosted Sterling in the short term, however, this momentum within the retail sector is not expected to last, as rising inflationary pressure is expected to increasingly filter through into the wider economy and drive prices higher in coming months.
Krone Under Pressure as US Oil Production Rises
The appeal of the Norwegian Krone (NOK) was boosted early in the week by the year-on-year inflation rate for December holding steady at 3.5%, with inflation not drifting any further away from the 2.5% target of Norges Bank.
However, signs of increasing pressure within the global oil market, as US production increases to fill the void left by OPEC and Russia’s agreed output cuts, the Krone has struggled to particularly capitalise on the softness of the Pound.
While risk appetite generally picked up in the wake of US president elect Donald Trump’s first media conference of the year, thanks to a lack of detail on his economic plans, this was ultimately not enough to prevent the Pound Norwegian Krone (GBP NOK) exchange rate from rallying.
Hard Brexit Worries Predicted to Maintain Sterling Downside
Worries over the possibility of a hard Brexit are likely to continue to drag on the Pound in the absence of any fresh domestic data, limiting the upside potential of the GBP NOK exchange rate.
Alvin Tan, research analyst at Societe Generale, noted:
‘We continue to await the Supreme Court ruling on the Brexit case, which could be issued any day now. There is growing speculation that the court will affirm the need to obtain parliamentary approval before triggering Article 50.’
A sustained rally in oil prices could help the Krone to make some traction against the Pound, meanwhile, providing that the US rig count does not climb further on the week.
Confidence in the Norwegian economy could also be boosted if the domestic trade balance is found to have widened in December, with the Krone likely to return to an uptrend if the figure proves sufficiently bullish.
International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.
TAGS: Daily Currency Updates Pound Norwegian Krone Forecasts