GBP/NOK Exchange Rate Falls Ahead of UK Chancellor’s Mini Budget Report
The Pound to Norwegian Krone (GBP/NOK) exchange rate fell by -0.4% today as winter looks increasingly uncertain for the UK economy.
According to The Guardian, one Cabinet Office briefing reports fears of a combination of ‘severe flooding, pandemic influenza, a novel emerging infectious disease and coordinated industrial action, against a backdrop of the end of the [Brexit] transition period.’
As a result, demand for Sterling has fallen on rising concerns over UK-EU trade talks, which have failed to show any clear signs of reaching a post-Brexit trade agreement.
This follows a stark warning from the Bank of England’s (BoE) Governor, Andrew Bailey, that a no-deal Brexit would prove worse for the British economy than the coronavirus pandemic.
Meanwhile, Chancellor Rishi Sunak said that reading the OBR figures about the economic damage from Covid-19 would be a ‘sobering read’.
A Number 10 spokesman said:
‘Cabinet was told the OBR forecasts will show the impact the coronavirus pandemic has had on our economy and they will make for a sobering read, showing the extent to which the economy has contracted and the scale of borrowing and debt levels.’
Consequently, GBP investors are becoming more worried about the combination of the coronavirus and Brexit uncertainty severely impacting the British economy.
Norwegian Krone (NOK) Edges Higher on Hopes for Norwegian Economic Recovery
The Norwegian Krone (NOK) rose today following the release of September’s Norwegian Labour Force Survey, which rose by 5.2%.
As a result, NOK investors have become increasingly optimistic about Norway’s economy, particularly now that oil prices have showed a steady rebound over the past few weeks.
Norwegian oil firms have also increased their 2021 investment plans by 12%, sparking optimism in Norway’s oil-driven economy.
Analysts at Reuters commented:
‘Oil and gas firms in Norway have boosted their 2021 investment plans in recent months reflecting higher costs and schedule changes including deferred and accelerated projects.
‘Investment, impacting both the near-term growth of Norway’s economy as well as the country’s longer-term output of petroleum, is still expected to decline in 2021, but the drop will be smaller than anticipated three months ago.’
With oil prices increasing on hopes of a rollout of the coronavirus vaccine, we could see the oil-sensitive Norwegian Krone head higher.
GBP/NOK Outlook: Could Brexit Uncertainty Continue to Drag Down Sterling?
Norwegian Krone (NOK) traders will be awaiting Friday’s release of the latest Norwegian Retail Sales report for October.
Any improvement in Norway’s retail sector would prove NOK-positive.
Friday will also see the latest Norwegian unemployment data for November. If these increase, however, we could see NOK shed some of its gains.
Pound (GBP) investors will be monitoring Brexit developments for the rest of this week, with any signs of a possible UK-EU trade agreement emerging being GBP-positive.
However, with the outlook for the British economy remaining largely uncertain, we could see the GBP/NOK exchange rate continue to fall.