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GBP to NOK Exchange Rate Strikes 4-Month-Best amid Brexit Deal Hopes

September 28, 2020 - Written by Frank Davies

With the Norwegian Krone still under broad pressure and weakness, the British Pound to Norwegian Krone (GBP/NOK) exchange rate is continuing its impressive advances this week. While the Norwegian Krone’s weakness has played a big part in the pair’s huge gains lately, UK Brexit and coronavirus speculation is helping the Pound to capitalise on that Krone weakness and push the pair to its best levels in months.

The Norwegian Krone was hit hard by market risk-aversion last week, helping GBP/NOK to rebound strongly from 11.74 to 12.19 throughout the week.

GBP/NOK continues to trend with a strictly upside bias as the Pound is seeing a strong jump in demand this morning. At the time of writing, GBP/NOK is trending near a high of 12.29. This is the best level for the pair in over four months, since May.

GBP Exchange Rates Continue Advances on Hopes for Brexit Deal

Last week saw the Pound advance against many major rivals. The British currency jumped on hopes that Britain would be able to weather a second wave of the coronavirus pandemic without going into a second full lockdown.

While some coronavirus hopes helped the Pound to remain buoyant last week though, this morning the Pound has seen a jump in demand due to a combination of Brexit and Bank of England (BoE) speculation.

This week is expected to see the UK and EU hold the final scheduled round of Brexit negotiations.

After almost no progress all year, there was reportedly some softening positions over the last week or so. This, as well as the brinksmanship in talks so far, has led to hopes that if any deal is made, this is the week it could happen.

According to Athanasios Vamvakidis, Global Head of G10 FX Strategy at BAML:

‘Just a couple of weeks ago, everything was falling apart. There was the internal market bill and the chances for a deal had collapsed,

And since then it seems that the UK government...have indicated that they will avoid violating the withdrawal agreement so this was one positive,’

It is being seen as the last chance for the UK and EU to agree to a post-Brexit trade deal. However, some analysts note that there is always a chance of delays and to make a deal even more last minute.

Neil Wilson at said:

‘I would expect this to drag on for a while longer, for deadlines to be missed and for GBP crosses to remain exposed to negative headline risk.’

Overall though, the Pound is strong on today’s Brexit hopes. Signs that the Bank of England is still hesitant to use negative interest rates are also supporting the Pound.

NOK Exchange Rates Steady amid Mixed Norway Retail Sales Results

Investors have seen selling the Norwegian Krone en masse in recent weeks, with last week’s losses being particularly shocking.

The Norwegian Krone plummeted across the board. Investors sold the currency as global markets avoided risks, due to a global rise in coronavirus cases.

With the coronavirus Covid19 seeing a second wave of infections, particularly across Europe, fears of the economic impact from the pandemic have left investors risk-averse.

The risk and trade-correlated Norwegian Krone plummeted as a result. Poor prices of oil, Norway’s biggest export, only deepened those losses as investors looked to safe havens instead.

Today’s Norwegian retail sales results ultimately had little notable impact on the Norwegian Krone.

Retail sales contracted at a worse than expected –4.9% month-on-month in August. The yearly figure was better than forecast at 8.2% however.

GBP/NOK Exchange Rate Forecast: Potentially a Huge Week for Brexit

In a month filled with coronavirus panic and market chaos, the coming week could be even more pivotal for the Pound depending on potential Brexit developments.

If the UK and EU reach any agreements on the Brexit process, the Pound could see a surge in demand, particularly if a breakthrough is reached as some speculate could happen.

However, if there are delays or the final round of talks fails completely, the Pound could quickly shed much of its recent gains.

Pound investors will also be paying close attention to UK growth rate data, due for publication on Wednesday. This will give investors a better idea of how resilient Britain’s economy has been amid the pandemic.

Manufacturing PMI data for both Britain and Norway will be published later in the week. It will make the current impact of the pandemic on these economies clearer.

Of course, coronavirus developments will remain influential as well.

If there are signs that Britain could need stricter lockdown, the Pound could weaken. Signs of the pandemic worsening across Europe could weaken the Krone instead though and make continued Pound to Norwegian Krone exchange rate gains easier.
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