GBP/NOK Outlook:
The GBP/NOK exchange rate is likely to decrease as it currently sits at 90-day lows and is significantly below its recent average. This downward pressure is primarily driven by expectations of a rate cut from the Bank of England.
Key drivers:
• Rate gap: The Bank of England has maintained a cautious monetary policy while the Norges Bank is expected to keep rates steady, which favors the NOK.
• Risk/commodities: Oil prices are currently at 90-day highs, benefiting the NOK due to Norway's status as a major oil exporter.
• One macro factor: Speculation surrounding UK political developments could further undermine confidence in the GBP.
Range:
The GBP/NOK is expected to drift within its recent range, with a potential test of the lower end as pressures mount.
What could change it:
• Upside risk: A surprise decision by the Bank of England to maintain interest rates could lift the GBP.
• Downside risk: Continued deterioration in UK retail sales data could strengthen the bearish trend for the GBP.