Bias: GBP/NOK is bullish-to-range-bound as it is currently 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 potential rate cuts contrasts with Norges Bank's steadfast stance, which currently favors the krone due to higher yields.
- Risk/commodities: Oil prices are above average, supporting the krone since Norway is a major oil exporter, which typically strengthens its currency.
- Economic growth: UK GDP growth projections are sluggish, which may weigh down the GBP against stronger currencies like the NOK.
Range: GBP/NOK is likely to remain within its recent stable range, drifting but possibly testing the upper extremes.
What could change it:
- Upside risk: An unexpected acceleration in UK economic growth could strengthen the GBP significantly.
- Downside risk: A sharp decline in oil prices could weaken the NOK, leading to a lower GBP/NOK exchange rate.