GBP/NOK Exchange Rate Rises as Norges Bank Mulls Over Stimulus Measures
The Pound Norwegian Krone (GBP/NOK) exchange rate edged higher today with the pairing currently trading around 13.286kr. The Norwegian Krone (NOK) continues to suffer from plunging oil prices and the recent doubling in Norwegian unemployment.
Norway’s economy also continues at the risk of a recession, with its economy being particularly reliant on its large oil exports, the nation’s largest commodity.
Erica Blomgren Dalsto, chief strategist for Norway at SEB, comments:
‘[The Norwegian Krone’s weakness is] a combination of collapse in oil price and risk sentiment. That has triggered some forced selling of Norwegian kroner due to equity portfolios. The moves have been amplified because liquidity is extremely thin. Everybody is trying to sell less liquid stuff to get their hands on [safe-haven] Dollars.’
Meanwhile, Norges Bank continues to mull over the process of stepping up stimulus measures to aid the Norwegian economy amid what it described as an ‘extraordinary situation in the market’.
Norges said in its statement:
‘Against this background Norges Bank is continuously considering whether there is a need to intervene in the market by purchasing Norwegian Kroner.’
GBP/NOK Exchange Rate Edges Higher as BoE Slashes Interest Rate to Record-Low
The Pound (GBP) edged higher against the weaker NOK after the Bank of England (BoE) cut its interest rates to 0.1% and added an additional £200bn in quantitative easing. This benefited the Pound as markets are now optimistic that the Bank are making enormous efforts to support the economy.
Tom Stevenson, Investment Director at Fidelity International, commented:
‘Britain is now a whisker away from the negative interest rate club. Rates have never been this low in the more than 300-year history of the Bank of England. Purchases of government and corporate bonds have been ramped up. A desperate measure for a desperate situation.’
Rishi Sunak, the newly appointed Chancellor of the Exchequer, also reiterated his pledge to take ‘whatever action is necessary’ during the Covid-19 crisis.
Sterling has recovered from the extreme lows of yesterday, which saw the GBP/USD exchange rate plummet to a 35-year low, while the it preformed at 11-year lows against the Euro. However, as global markets show modest signs of stabilising the Pound’s appeal has begun to grow.
GBP/NOK Outlook: Could Sterling Rise on Stabilising Markets?
The Norwegian Krone (NOK) will remain sensitive to oil prices and commentary from Norges Bank. Any signs of stimulus measures or improving oil prices in the near-term would prove NOK-positive.
The GBP/NOK exchange rate will remain volatile this week as the UK economy continues to struggle amid the Covid-19 pandemic. With the Pound increasingly sensitive to global economic developments, any signs of market stabilisation would provide GBP with a boost.