GBP to NOK Exchange Rate Sheds Last Week’s Gains despite Weaker Oil Prices

September 7, 2020 - Written by James Fuller

STORY LINK GBP to NOK Exchange Rate Sheds Last Week’s Gains despite Weaker Oil Prices

The Pound plummeted across the board today, so while the Norwegian Krone has been a little weaker in recent sessions, the British Pound to Norwegian Krone (GBP/NOK) exchange rate has still been trending lower. A sudden shock to the Brexit process has left Pound investors anxious about the rising possibility of a worst case scenario no-deal Brexit, but the Norwegian Krone’s appeal has been limited due to falling prices of commodities and coronavirus jitters.

Last week was a highly mixed one for GBP/NOK. After opening the week at the level of 11.74, GBP/NOK briefly slipped to a low of 11.61 before rebounding.

GBP/NOK ultimately ended the week much higher, at the level of 11.83. This was just below Friday’s high of 11.87, which was also the best level for GBP/NOK in about a month.

However, GBP/NOK has been unable to sustain these gains. In fact, GBP/NOK began to tumble again when markets opened today, quickly shedding all of last week’s gains and trending closer to the level of 11.72 at the time of writing.

GBP Exchange Rates Throttled by Returning No-Deal Brexit Fears

Investors sold the Pound across the board today. While the Pound was driven by movement in rival currencies last week, hard Brexit fears have been gradually returning to focus and the weekend’s Brexit developments had a notable impact on the market’s mood.

When markets opened this morning, the Pound begun to weaken as markets digested reports over the UK government’s latest Brexit plans.

Those losses only accelerated throughout the day. The Pound ended up much lower, even against weaker rivals like the Norwegian Krone.

The Brexit news was the biggest news of the day for Sterling. It caused no-deal Brexit fears to return to focus, after months of them bubbling in the background while the focus remained on the coronavirus pandemic.

According to Kallum Pickering, Analyst at Berenberg Bank:

‘It seems odd, to say the least, that the UK could be about to undermine its commitments to Ireland with upcoming legislation after the UK had recently taken steps in recent months to prepare Northern Ireland’s border for exit day. It suggests the UK is trying to increase the pressure to get a deal more to its liking rather than going for a hard exit. Either way, the strategy does not raise the chance of a good outcome’

NOK Exchange Rate Appeal Limited amid Norway’s Worsening Coronavirus Situation

The Norwegian Krone has seen months of strong performance this year, as markets have been impressed with the nation’s resilience to the coronavirus pandemic.

Norway’s resilient economy, and the fairly low infection rate in the nation, both helped the Norwegian Krone to perform strongly for some time.

However, in recent weeks the Norwegian Krone has been weaker. This has been due to signs that Norway’s coronavirus situation is worsening.

Norway’s infection rate rose above Sweden’s for the first time since April.

Due to fresh local outbreaks in Norway, the nation has seen fresh travel quarantine rules as well. Travellers from most of Europe as well as all travellers from outside the EU must quarantine for 10 days.

The news has dampened the Norwegian Krone’s appeal.

On top of this though, the Krone is being weighed by weakness in prices of oil. Oil is a major export for Norway, so the Norwegian Krone is often correlated to oil prices.

Slower oil imports from China, as well as cut oil prices from Saudi Arabia oil producers, weighed heavily on the commodity and further limited Krone demand.

GBP/NOK Exchange Rate Forecast: Brexit Developments in Focus This Week

The Pound was hit hard by fresh no-deal Brexit fears at the beginning of the week, so Brexit uncertainty has returned to focus for investors.

With Brexit jitters returning to the Pound outlook, the British currency may lack the drive to advance much this week unless there is some kind of optimistic development, or unless the Pound’s rivals weaken.

For example, if the UK government walks back on its Brexit plans, or if there are developments in negotiations, the Pound may advance.

On the other hand though, Sterling could be in for deeper losses if Brexit uncertainties continue to intensify.

The Norwegian Krone, on the other hand, will be influenced by domestic coronavirus developments. Thursday’s Norwegian inflation rate report from August could also cause NOK movement.

UK production and growth data, due for publication at the end of the week, could also cause Pound to Norwegian Krone exchange rate movement.

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TAGS: Pound Norwegian Krone Forecasts