GBP/NOK Outlook: Slightly weaker, but likely to move sideways as the rate is below its recent average and near recent lows, lacking a clear driver. Key drivers:
• Rate gap: The Bank of England is expected to cut rates in the coming months, contrasting with Norges Bank maintaining higher rates, which supports the NOK.
• Risk/commodities: Oil prices are currently elevated, which could strengthen the NOK as Norway is a significant oil exporter.
• One macro factor: UK inflation is projected to decline, prompting expectations of further cuts from the BoE, which may pressure the GBP.
Range: GBP/NOK is likely to hold within its recent trading range as the current pressures balance out.
What could change it:
• Upside risk: A stronger-than-expected performance in the UK manufacturing sector could support the GBP.
• Downside risk: Continued geopolitical tensions may lead to a flight to safety, benefiting the NOK over the GBP.