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GBP to NOK Exchange Rate Struggles Ahead of UK Job Report as Norwegian Inflation Resilient

August 10, 2020 - Written by Tim Boyer

The Pound has been unable to hold the gains it saw after last week’s Bank of England (BoE) policy decision, and the Norwegian Krone is seeing resilience today that is also weighing on the British Pound to Norwegian Krone (GBP/NOK) exchange rate. For now, Sterling investors are highly awaiting UK data due for publication in the coming days, but both the Pound and the Krone will also remain sensitive to coronavirus developments.

Despite weakness in oil prices, the Norwegian Krone has been strong lately, and this dragged GBP/NOK lower last week. Last week saw GBP/NOK tumble from the level of 11.90 to 11.80 throughout the week.

Since markets opened today, GBP/NOK has seen more modest movement but the pair is still trending below the week’s opening levels as the Pound struggles to advance.

At the time of writing, GBP/NOK is trending in the region of 11.79.

GBP Exchange Rates Pressured by Coronavirus Jitters Ahead of UK Jobs Report

The Pound has seen a fairly impressive rebound since late-July, as the currency benefitted from weakness in the US Dollar (USD) and other rival currencies.

Sterling was able to extend its rebound slightly last week, thanks to the Bank of England (BoE) seeming less dovish on Britain’s 2020 outlook than in May.

However, even this was not enough to help the Pound to avoid losses against the more resilient Norwegian Krone.

In fact, the Pound remains broadly pressured and weak due to various factors. This includes the possibility of negative interest rates from the Bank of England (BoE), as well as domestic coronavirus, economic and Brexit concerns.

Not only have there been no notable Brexit developments lately, but speculation is rising that the global ‘second wave’ of coronavirus infections could have a particular hard impact on Britain’s economy.

According to a fresh poll, a third of UK employers are expecting to cut jobs in Britain this autumn. According to Jasper Jolly, reporter at The Guardian:

‘About 33% of more than 2,000 companies, charities and public sector bodies in the poll said they expected to make redundancies in the third quarter of 2020, according to figures from the Chartered Institute of Personnel and Development (CIPD) and Adecco Group, a staffing company.

The poll suggests the UK is likely to experience a wave of job losses across the economy as the government starts to withdraw the coronavirus job retention scheme.’

This is on top of fears that the UK could soon extend its lockdown plans.

NOK Exchange Rates Benefit from Solid Norway Inflation Report

Despite mixed strength in oil prices lately, the Norwegian Krone continues to see broad resilience.

Investors bought the Norwegian Krone to its best levels in months against some majors like the US Dollar last week. This was due to a combination of factors.

Hopes for oil prices to recover from the coronavirus pandemic due to actions from oil producers have benefitted NOK despite mixed price movement.

Norwegian data has also been resilient so far amid the coronavirus pandemic, with much Norwegian data beating expectations.

This includes today’s Norwegian inflation rate results, which came in stronger than forecast in many key prints.

Norway’s July inflation rate jumped from 0.2% to 0.7% month-on-month, better than the expected 0.5%. The yearly figure slipped to 1.3%, which was also better than the expected 1.1%.

The core inflation figures were even better. July’s core inflation figure was expected to slip to 2.9% year on year but instead rose to 3.5%.

GBP/NOK Exchange Rate Forecast: UK Data Takes Focus with Job Stats Due Tomorrow

With Norway’s inflation rate data published and stronger than expected, the Norwegian Krone is likely to be influenced more by market trade sentiment and oil prices over the coming sessions.

Still, the Krone remains fairly resilient despite weakness in trade sentiment, which could instead leave GBP/NOK driven more by strength in the Pound.

Sterling investors are highly anticipating major UK ecostats due this week, especially tomorrow’s UK job market report.

The Bank of England (BoE) has repeatedly expressed concern about the resilience of Britain’s job market amid the coronavirus pandemic.

There are concerns that the government unravelling its furlough scheme, combined with ongoing lockdown measures, will significantly damage some UK businesses.

If UK unemployment worsens more than forecast, the Pound could be hit even lower.

On the other hand, strong UK job stats could bolster Sterling support and help the Pound to Norwegian Krone exchange rate to mount more of a recovery.
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