GBP/NOK Outlook:
The GBP/NOK rate is currently below its recent average and near recent lows. This suggests a bearish outlook for the exchange rate as weak UK economic data weighs heavily on the pound.
Key drivers:
• Rate gap: The Bank of England's cautious stance on interest rates contrasts with Norges Bank's stable rate policy, causing downward pressure on GBP.
• Risk/commodities: Higher oil prices have supported the Norwegian Krone, with oil trading significantly above its recent average, boosting NOK due to its export earnings.
• One macro factor: Rising unemployment in the UK indicates a weakening economy, enhancing the likelihood of rate cuts from the Bank of England.
Range:
The GBP/NOK is expected to drift within its recent range, with a possibility of testing the lower extremes as market dynamics unfold.
What could change it:
• Upside risk: A sudden increase in UK inflation could lead to a more favorable view on GBP.
• Downside risk: Further disappointing economic indicators from the UK could deepen the bearish trend for GBP.