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GBP to NOK Exchange Rate Avoids Losses as Norway’s Economy Worse-Hit Than Expected

June 24, 2020 - Written by John Cameron

Despite market risk-aversion hitting the Pound today, the British Pound to Norwegian Krone exchange rate has been able to avoid losses. The latest Norwegian data has been unable to impress investors, and looking ahead the Norwegian Krone could take more damage from flaring coronavirus pandemic fears.

Still, GBP/NOK has only seen limited recovery. Last week saw GBP/NOK slump from 12.09 to 11.90 as various factors bolstered the Krone’s appeal.

This week’s movement has been more narrow and jittery so far. While the Norwegian Krone is too weak to push GBP/NOK lower, the pair still briefly touched on a low of 11.81 earlier in the weej before recovering.

At the time of writing on Wednesday, GBP/NOK is trending just above the week’s opening levels, in the region of 11.94. The Pound is fairly unappealing, so it is largely benefitting from Norwegian Krone weakness.

GBP Exchange Rates Struggle to Advance as Currency Seen Increasingly Risky

Even after hitting major lows against many major currency rivals, investors are hesitant to buy the Pound back up too much.

Not even this week’s strong UK data has helped the Pound much.

Yesterday’s UK PMI results beat expectations in all major prints and indicated that Britain’s economy was weathering the coronavirus pandemic, but concern about how the pandemic would continue to impact Britain’s economy continued to weigh heavily.

On top of that, market risk-aversion is weighing on the Pound this week.

This is because markets are increasingly perceiving the Pound as an asset correlated to market risk-sentiment.

According to Kamal Sharma, Currency Analyst at Bank of America (BofA), the Pound just hasn’t recovered from the impact the 2016 Brexit referendum had on it. He said today:

‘The Pound increasingly resembles the more liquid emerging market currencies rather than a core G10 currency,

We believe Sterling is in the process of evolving into a currency that resembles the underlying reality of the British economy: small and shrinking with a growing dual deficit problem similar to more liquid [emerging market] currencies,’

NOK Exchange Rates Throttled by Global Trade Jitters and Data

While market risk-aversion is weighing on the Pound, the Norwegian Krone is much more strongly correlated to market trade-sentiment than Sterling is.

Oil is a major export for Norway, and oil prices have taken a hit in recent sessions due to surging fears of a ‘second wave’ of coronavirus infections.

Oil prices tumbling on ‘second wave’ fears and signs of rising oil inventories were only one of the things causing trade jitters today though.

There are rising signs that trade tensions between the US and Europe are surging again. According to Christopher Smart, Chief Global Strategist at Barings:

‘Yet familiar worries around trade friction have also re-appeared. Not only does the US-China deal look tenuous as Beijing remains behind on its promised purchases and the election campaign heats up, but reports have emerged that Washington is considering broad new tariffs against European luxury amid longstanding concerns about aircraft subsidies. Clearly, there is still much about the post-COVID world that looks a lot like the pre-COVID world!’

On top of worsening trade jitters, the latest Norwegian data has done little to support the Krone outlook either.

This morning’s Norwegian unemployment rate unexpectedly worsened from 3.6% to 4.2%, rather than the forecast 3.8%. It has worsened concerns about how Norway’s economy is weathering the coronavirus pandemic.

GBP/NOK Exchange Rate Forecast: Trade Sentiment and Norwegian Data in Focus

Could the Pound to Norwegian Krone exchange rate see further gains in the coming sessions? That depends on various factors both global and domestic.

While the Pound’s outlook remains clouded by coronavirus and Brexit gloom, the British currency could become more appealing than the Norwegian Krone if upcoming news causes the Krone to fall.

Investors may be more willing to sell the Krone and have GBP/NOK recover if the global trade outlook worsens for example.

If ‘second wave’ coronavirus fears continue to knock oil prices, or if US trade tensions flare up again, the Norwegian Krone is likely to see fresh weakness.

Domestically, the Norwegian Krone could also be hit if Friday’s upcoming retail sales results from May come in worse than forecast.

As investors have been overlooking UK data recently, the British Pound to Norwegian Krone exchange rate is likely to brush over tomorrow’s UK distributive trades data in favour of coronavirus developments.
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