June 30, 2020 - Written by John Cameron
STORY LINK GBP to NOK Exchange Rate Struggling to Hold as UK Coronavirus Outlook Worsens
Even though prices of commodities like oil have been falling this week, the British Pound to Norwegian Krone (GBP/NOK) exchange rate is struggling to hold its ground. In fact, the number of factors weighing on the Pound has only worsened today, as the latest UK political news fails to impress markets, while UK data falls short of expectations.
Tumbling oil prices and risk-aversion made it easier for GBP/NOK to advance last week, as the pair rose from 11.90 to 11.96 throughout the week.
However, since markets opened this week, GBP/NOK movement has seen a more bearish bias. GBP/NOK slipped back to last week’s lows yesterday. While the pair has recovered slightly today, it is still generally trending just below the week’s opening levels.
At the time of writing on Tuesday afternoon, GBP/NOK is trending near the level of 11.95.
GBP Exchange Rates Remain Under Pressure as UK Government Fails to Impress Investors
The Pound remains unappealing for various reasons, both global and domestic. As fears rise that a ‘second wave’ of coronavirus infections is on the way, investors are even more anxious about Britain’s gloomy coronavirus outlook.
Britain’s government has come under criticism for its handling of the pandemic in recent months. Concerns also persist regarding the government’s supposed lack of plan for UK-EU relations post-Brexit.
Due in part to Britain’s broadly concerning outlook, investors have not been too impressed with the latest UK economic plans from the government either.
UK Prime Minister Boris Johnson has unveiled what he calls a ‘Rooseveltian’ infrastructure package for Britain’s economy. Today he held a speech pitching this ‘New Deal’, however, it does not appear to have been hugely impressive to markets.
According to the Institute for Public Policy Research, a London think-tank, the plans fell short of what would be needed. Jonathon Webb from IPPR said:
‘Loosening planning restrictions so that more commercial properties can be converted to residential homes puts the future delivery of affordable homes at risk and will accelerate the hollowing out of communities and the decline of the high street. A proper blueprint for town centres is needed.’
On top of this, markets are also anxious about how the government will pay for these plans.
Britain’s latest growth results, published today, also weighed on the Pound. They showed that Britain’s economy contracted even more than expected in Q1 2020.
NOK Exchange Rates Resilient despite Poor Oil Price Performance
The Norwegian Krone has performed strangely strongly for a currency that is often correlated to oil prices.
Oil is one of Norway’s biggest exports. As a result, weak oil prices normally weigh heavily on the Norwegian Krone, and oil prices have indeed been hit hard by fears of a ‘second wave’ in the coronavirus pandemic.
Oil prices have been tumbling over the past week. Despite this though, the oil-correlated Norwegian Krone has been able to hold its ground.
This is due partially to the Pound’s weakness making it easier to keep GBP/NOK low. However, it is also due to market optimism over Norway’s economy amid the coronavirus pandemic.
Norway’s retail sales rebounded strongly in the latest report despite the pandemic. April’s figures came in at a strong 3.8%. Norwegian inflation has been beating forecasts as well, rising to 1.3% in the latest figures.
Signs of stability in Norway’s economic performance, despite the pandemic, have limited the currency’s impact from panicked shifts in risk-sentiment.
GBP/NOK Exchange Rate Forecast: Coronavirus Jitters May Not Hurt Norwegian Krone
The Norwegian Krone has seen surprisingly resilient performance despite worsening coronavirus fears and tumbling oil prices.
In fact, the Pound to Norwegian Krone exchange rate could remain under pressure and struggle to advance as the Norwegian Krone continues to benefit from hopes of Norway’s economic resilience.
Investors will get a better idea of how Norway’s economy is performing amid the crisis tomorrow, when DNB’s Norwegian manufacturing PMI report from June will be published. Then, towards the end of the week, Norwegian unemployed persons data will be published.
If this data impresses investors, GBP/NOK is less likely to trend higher as the Krone is more likely to hold its ground.
On the other hand though, if the data disappoints, or oil prices continue to tumble, the Norwegian Krone could see fresh pressure.
The Pound is likely to remain jittery though. Unless Britain’s coronavirus outlook improves, or there are optimistic Brexit developments, investors are unlikely to find much reason to buy Sterling.
Even if upcoming UK PMI data beats forecasts, the Pound to Norwegian Krone exchange rate is likely to remain under pressure.
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TAGS: Pound Norwegian Krone Forecasts