Pound to Norwegian Krone Exchange Rate Struggles to Sustain Gains amid Trade Optimism
The Pound (GBP) saw a strong performance on the back of last week’s UK General Election outcome, but the Norwegian Krone (NOK) outlook has also been rising on global trade hopes and this has dampened the Pound to Norwegian Krone (GBP/NOK) exchange rate’s gains.
After opening last week at the level of 12.00, GBP/NOK did briefly touch on a high of 12.21 on Thursday night – the best level for the pair since the 2016 Brexit Referendum.
However, GBP/NOK was ultimately unable to sustain significant gains, closing the week nearer the level of 12.04.
At the time of writing, GBP/NOK still struggles to hold its ground and is trading closer to the level of 12.00 again.
The trade-correlated Norwegian Krone’s outlook has been supported by the latest developments in US-China trade negotiations, as well as expectations for continued hawkishness from the Norges Bank.
Pound (GBP) Exchange Rate Strength Limited as UK PMIs Disappoint
Towards the end of last week, the Pound saw a sharp surge in demand in reaction to the results of Britain’s 2019 General Election.
A strong performance for the ruling Conservative Party boosted the Pound’s outlook, as it meant that the party’s relatively soft Brexit plan would be able to go ahead and that the next phase would begin in the New Year.
However, while the UK political outlook improved and boosted the Pound, Sterling had already seen strong gains on election hopes and investors quickly have been adjusting slightly lower since the election results.
On top of this, a combination of a strong Norwegian Krone as well as weak UK data left GBP/NOK under fresh pressure today.
Britain’s December PMI projections from Markit fell short of expectations in every major print, with the manufacturing contraction deepening to 47.4 and services also falling further into contraction.
Overall, this left the composite PMI near its worst levels in over three years.
Norwegian Krone (NOK) Exchange Rates Supported by Global Trade Developments
The Norwegian Krone was surprisingly resilient against a surging Pound last week and ultimately didn’t fall too far against the British currency.
This is because the trade-correlated Krone has found fresh support in recent sessions from news that the US and China had agreed to a ‘phase one’ trade deal.
After months of hopes that a trade breakthrough was getting nearer, the nations announced a preliminary trade deal had been reached at the end of last week. The deal would also lead to some planned tariffs being lightened.
It strongly boosted assets like trade-correlated currencies and commodities that would benefit from a calmer trade landscape.
The Norwegian Krone is often correlated to trade, as well as oil prices. As oil prices also advanced on the news, the Norwegian Krone was especially appealing.
Today’s Norwegian trade balance report from November showed a decent gain in surplus over the previous month, which also likely supported the Norwegian Krone today.
Pound to Norwegian Krone (GBP/NOK) Exchange Rate Could Be Driven More by UK Data
With Britain’s political outlook finally calming from months of deadlock and uncertainty, and the Brexit process expected to see solid progress over the next couple of months, Pound investors may turn attention back to Britain’s economic outlook.
UK data has been poor in recent months amid broad uncertainty over Brexit from businesses and consumers.
Some analysts, such as EY Item Club’s Howard Archer, believe that things may begin to improve amid a more stable political outlook.
Still, for now the coming week’s slew of upcoming data could influence Bank of England (BoE) speculation and the Pound.
UK job market stats will be published tomorrow, inflation will follow on Wednesday, retail sales on Thursday and growth on Friday.
The Pound to Norwegian Krone (GBP/NOK) exchange rate could also see notable movement if Thursday’s Norges Bank policy decision or outlook surprise investors.
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