August 17, 2020 - Written by Ben Hughes
STORY LINK GBP to NOK Exchange Rate Pressured Near Worst Levels as Markets Optimistic on Krone
While the Pound was able to hold its ground against some major rivals today, the British Pound to Norwegian Krone (GBP/NOK) exchange rate continues to trend with a downside bias today. The Norwegian Krone is still trending near its best levels and the currency outlook has seen little to damage it. A lack of fresh support for the Pound, meanwhile, is leaving Sterling investors anxious about upcoming Brexit negotiations.
The Norwegian Krone continues to gain ground. After opening last week at the level of 11.80, GBP/NOK briefly treaded water before slumping towards the end of the week.
GBP/NOK briefly touched on a low of 11.59 - the worst level for the pair since late-July – before ending the week just a little higher in the region of 11.63.
However, since markets opened this week GBP/NOK has been trending under pressure once more. At the time of writing, GBP/NOK is trending close to last week’s August lows.
GBP Exchange Rates Lack Drive as Markets Await Brexit Developments
After attempting rebounds earlier in August, the Pound’s movement has become limper over the past week or so. The British currency has been driven more by movement and weakness in rival currencies.
Investors are broadly hesitant to buy the Pound too much, amid concerns over Britain’s various gloomy outlooks.
For example, the UK government’s handling of the coronavirus pandemic has seen mixed reaction, and Britain’s economy has shown mixed signs of weathering the pandemic.
On top of this, there has still been no notable development in the Brexit process in recent months. Brexit uncertainties are again weighing on the Pound today, ahead of another round of UK-EU Brexit negotiations set to take place this week.
Markets remain hopeful that there will be some kind of Brexit deal agreed by the end of the year, but analysts note that the chances of a no-deal Brexit are becoming more pronounced. According to Jane Foley, Senior FX Strategist at Rabobank:
‘In the market many people assume that politicians have an incentive to go to the 11th hour – why would they concede ground when there’s more time to go?
If it becomes clearer that a deal won’t be had – or if there could be maybe a broad deal but there are lots of sectors of the economy in the UK that are unhappy about that – then I think sterling could still be vulnerable on that front too,’
NOK Exchange Rates Resilient as Norwegian Data Strong
The Norwegian Krone has continued to see strong performance in recent weeks, despite concerns about market trade-sentiment and mixed oil prices.
While oil is Norway’s biggest export though, the Norwegian Krone has been more correlated to Norway data than oil prices recently.
The coronavirus pandemic continues to dominate global markets, but Norway’s economy seems to have been weathering the crisis better than expected.
Last week’s notable Norway data was better than expected. While this morning’s Norwegian trade stats weren’t as strong as expected, the Norwegian Krone remained resilient as investors await this week’s Norges Bank news.
The Norges Bank is expected to leave Norway’s monetary policy frozen this week. According to Analysts at DNB:
‘We believe Norges Bank has time to wait for a deeper and more extensive assessment in the September monetary policy report before potentially changing its rate path and short-term guidance,’
GBP/NOK Exchange Rate Forecast: Brexit and Norges Bank Developments in Focus
Investors are hesitant to move too much on the Pound or Norwegian Krone so far this week, as markets await potentially bigger developments later this week.
UK-EU Brexit negotiations are set to resume tomorrow and will last much of the week
If there are any surprising developments in Brexit talks, such as any hints that a deal is closer to being reached, the Pound could see a big jump in demand.
On the other hand, if there are no developments or tension worsen, the Pound will remain under pressure and will struggle to sustain much in the way of recovery.
Meanwhile, the Norwegian Krone is likely to remain fairly appealing, at least until it is potentially moved by Thursday’s upcoming Norges Bank news.
If the Norges Bank
surprises investors by shifting its monetary policy stance, the Norwegian Krone is likely to be influenced. If the bank ramps up coronavirus concerns, the Krone could weaken.
Of course, global coronavirus and trade developments could also influence the Pound to Norwegian Krone exchange rate.
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TAGS: Pound Norwegian Krone Forecasts