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GBP to NOK Exchange Rates Holding Above Weekly Worst Thanks to Brexit Deal Hopes

November 17, 2020 - Written by James Fuller

Despite rising oil prices and market sentiment on coronavirus vaccine hopes, the British Pound to Norwegian Krone (GBP/NOK) is avoiding its worst levels today. Hopes that a UK-EU Brexit deal can still be reached are helping to buoy the Pound, while the Norwegian Krone’s appeal is limited due to concerns that the coronavirus pandemic will still be around for months before vaccines are ready.

Last week saw mixed GBP/NOK movement for similar reasons. After opening last week at the level of 12.04, GBP/NOK briefly slipped and fell to a low of 11.81. This was the worst level for the pair in a month and a half.

GBP/NOK spent the remainder of last week recovering, and the pair ultimately closed the week near the level of 12.09.

This week so far, GBP/NOK has been trending lower again though. GBP/NOK has already lost all of last week’s gains. However, the pair is holding above last night’s lows, and currently trends in the region of 12.00.

GBP Exchange Rate Losses Limited as Brexit Hopes Persist

Investors are hesitant to sell the Pound too much this week, amid speculation that a Brexit deal may be mere days away.

Markets have speculated in recent weeks that UK and EU officials could finally reach some kind of Brexit deal as soon as this week. Generally, markets are still betting that a deal could be reached before the end of this month.

Sterling has been able to hold its ground either though, as speculation persists that UK-EU Brexit negotiations will go down to the wire once again.

Some analysts are warning that further delays in talks combined with many key talking points remaining unresolved could worsen the potential risk of a no-deal outcome to Brexit, despite confidence from officials recently.

Still, overall economists remain optimistic that the productive tone of officials means a deal is more likely than no deal. According to Timothy Graf, Head of Macro Strategy at EMEA, speaking to Reuters:

‘Though the chance of a ‘No Deal’ outcome to negotiations is still alive, it does appear that gravity and politics are pulling the EU and UK closer to a deal and Sterling is getting some benefit from this,

Brexit still threatens to be a highly disruptive event to trade, supply chains and the workings of the UK’s financial services sector. A healthy discount to Sterling is likely required for the foreseeable future in order to attract the capital inflows needed to sustain a twin deficit economy.’

NOK Exchange Rates Higher as Coronavirus Vaccine Hopes Boost Oil

The Norwegian Krone has seen stronger performance this week, as it benefits from more positive market sentiment.

As the Norwegian Krone is often correlated to market trade-sentiment, it has been boosted by the market’s buoyed mood this week.

In particular, prices of oil are higher after news that US biotech firm Moderna was seeing promising success in its coronavirus vaccine trials.

As oil is a notable export for Norway, higher oil prices have been boosting the Norwegian Krone’s appeal as well.

According to Stephen Innes, Chief Global Market Strategist at Axi:

‘It has been a solid start to the week for oil markets, reflecting the vaccine tailwind driving strong risk appetite across all assets.’

Demand for the Norwegian Krone was also slightly boosted by today’s Norwegian growth rate data. Norway’s quarterly Q3 growth rate was better than forecast at 4.6%.

GBP/NOK Exchange Rate Forecast: Pair Could Recover on Brexit Developments

Uncertainty over Brexit is limiting the Pound’s appeal today, but Sterling’s best chance of advancing is likely optimistic news over the Brexit process.

If UK-EU negotiations lead to any positive Brexit developments or officials show more optimism about a deal, the Pound may be in for further gains.

However, if relations show signs of being shaky or no-deal Brexit fears worsen, the Pound could plummet instead.

The Norwegian Krone is likely to remain fairly appealing for the time being, as it benefits from more positive coronavirus and oil price bets in global markets.

Still, the Norwegian Krone could weaken if oil prices fall back amid winter coronavirus fears.

Upcoming data could influence movement as well. Tomorrow’s UK inflation rate results and especially Friday’s UK retail sales data could cause some Pound to Norwegian Krone exchange rate movement.
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