GBP/NOK Turns Bearish As Norway’s Manufacturing Figures Improve
The GBP/NOK currency pair kicked off this week on a bullish rally on Monday's trading session which indicates a correction from the bearish performance that was observed on Friday.
The GBP/NOK's bearish trend on Friday happened after the announcement of positive manufacturing data from Norway for April. The report indicated that the Norwegian manufacturing figures rose from 0.7% in March to 2.2% in April. The bearish trend on Friday due to the stronger Norwegian Krone in response to the positive manufacturing data. The exchange rate turned bullish on Monday, perhaps because on Monday because it is a holiday for Norwegian banks and it is known as Whit Monday. This gives the GBP more room to dominate.
The Krone is particularly sensitive to changes in economic data, and because Norway relies heavily on oil prices, oil, therefore, has a major impact on the currency. The rising oil prices on Friday contributed to the NOK's performance, which continued to move from its five-month lows.
Oil prices started going up after OPEC announced that it might extend crude oil cuts and also after the U.S. announced plans to delay tariffs against Mexico.
“After prices hit the depth of the sewer this week, and (are) arguably in oversold territory, traders were always going to be predisposed to book profits ahead of the weekend,” stated Stephen Innes, Vanguard Markets’ managing partner.
GBP held back by economic and political uncertainties
The Norwegian Krone’s strength was further enforced by the Great Britain Pound’s (GBP) failure to reap the benefits of the UK Halifax house report which indicated a 0.5% surge in May. The GBP’s failure to perform on the news was likely influenced by the ongoing economic and political uncertainties which have hugely affected trade in the European region. Brexit is one of the major issues that have held back the GBP over the past few months, during which investors took a cautious approach.
As for the future outlook, market experts expect the uncertain nature of the market to prevail, especially as British Prime Minister Theresa May steps down this month. There is uncertainty about the country’s economic stance of the incoming Prime Minister as well as the future relationship between the European Union and the UK.
The GBP/NOK is expected to react to the release of Norwegian inflation data today. If the data released will be positive, then there is a likelihood that it will strengthen the Norwegian Krone, thus, potentially influencing a strong bearish trend in the GBP/NOK. The chart might also turn bullish if the data released end up being negative.
Meanwhile, the GBP/NOK’s exchange rate performance is still mainly at the mercy of Brexit. Brexit is the major determinant that influences the exchange rate performance of the currency pair. There are fears of a wide Brexit-fueled political rift, especially with the recent parliamentary EU elections.
These issues have further contributed to a weaker GBP because traders are concerned about investing at such times. However, there is still hope that the high political climates will cool down soon as the Brexit issue approaches its conclusion.