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Pound Norwegian Krone (GBP/NOK) Exchange Rate Leaps in Spite of Norwegian Inflation Uptick

Pound Norwegian Krone Currency Forecast

Strengthening Norwegian Inflation Fails to Dent Pound Norwegian Krone (GBP/NOK) Exchange Rate

Better-than-expected Norwegian inflation data was not enough to keep the Pound to Norwegian Krone (GBP/NOK) exchange rate from rallying sharply at the start of the week.

Although the monthly inflation rate leapt from -0.7% to 0.4% this failed to offer the Norwegian Krone (NOK) any particular leg up against its rivals.

Rising inflation increases the chances of the Norges Bank raising interest rates sooner rather than later, especially in the wake of the bullish comments made at the central bank’s most recent policy meeting.

Even so, the prospect of higher interest rates was largely overshadowed by the latest decline in oil prices.

With the US Dollar (USD) back on a positive trend and with China enacting a fresh Covid-19 lockdown the appeal of oil weakened sharply, leaving the oil-sensitive Krone on the back foot.

Widened Norwegian Trade Surplus Set to Boost Krone Demand

Demand for the Norwegian Krone could pick up further in the coming week, though, if December’s trade data strengthens as forecast.

Markets expect to see the trade surplus widen from 0.2 billion to 10.2 billion in the final month of 2020, suggesting a greater degree of economic resilience.

As long as the Norwegian economy continues to show signs of resilience in the face of the ongoing pandemic this should give NOK exchange rates something of a boost.

On the other hand, if the trade balance fails to widen as far as forecast this could give investors further reason to sell out of the Krone this week.

The relative strength of USD exchange rates and weakening market risk appetite may also keep the Norwegian Krone under a degree of pressure for the foreseeable future.

Until investors see reason to bet on the prospect of the global economy bouncing back from its Covid-19 slump in the near future the potential for a NOK exchange rate rally may prove limited.

UK GDP Weakness Forecast to Weigh on GBP/NOK Exchange Rate

However, the Pound could struggle to hold onto its gains against the Norwegian Krone in the week ahead given a lack of UK data releases.

Doubts over the outlook of the UK economy may well mount in the face of the ongoing national lockdown, especially if signs suggest a prolonged period of tightened restrictions.

Further losses may also be in store for the Pound ahead of the weekend thanks to the release of November’s UK gross domestic product data.

Forecasts point towards a sharp monthly decline of -5.7%, reflecting the second national lockdown, which could drag the GBP/NOK exchange rate lower once again.

Any evidence that the UK is on course to experience a double-dip recession could see the Pound fall sharply out of favour, leaving GBP exchange rates biased to the downside once again.

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