Bias: The GBP/NOK exchange rate is currently bullish-to-range-bound, as it is above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Bank of England's cautious approach to future rate cuts contrasts with Norges Bank's decision to maintain a higher policy rate, which supports the krone.
- Risk/commodities: Oil prices are fluctuating, recently above the average, which can bolster the krone given Norway's status as a major oil exporter.
- Economic growth: The UK's projected GDP growth slowdown, combined with declining inflation, could dampen demand for the GBP.
Range: Expect the GBP/NOK to drift within its recent stable range, testing both upper and lower boundaries as market conditions fluctuate.
What could change it:
- Upside risk: A stronger-than-expected UK data release could boost the GBP.
- Downside risk: Higher oil prices or a hawkish shift in Norges Bank's stance could weaken the GBP against the NOK.