Following an eventful past week, which saw GBP/NOK plummeting the most in 3 years, the exotic pair continued to lose ground at the start of the holiday week after Prime Minister Boris Johnson ruled out an extension of a transition period for Britain to negotiate a trade deal with the EU beyond December 2020. GBP came under pressure due to a divergence of views among policy makers and analysts if that target date is reasonable.
Additional selling pressure came after Bank of England kept on Thursday its benchmark rate unchanged at 0.75% and revised down its GDP growth forecast for Q4. Last week, Norges Bank also kept its policy rate intact at 1.5%, while indicating rate stability during the ”coming period”.
On the political front, on December 20th UK Prime Minister Johnson won the parliament’s approval for his Brexit deal, while taking the first step to fulfilling his election pledge to deliver Brexit by January 31st. Policy makers voted by 358 to 234 to pass the second reading of the Withdrawal Agreement Bill, which could ensure a smooth ratification of the deal with Brussels.
The European Commission took note of the British parliament’s support for the withdrawal agreement with the EU and expressed intention to take formal steps to conclude the deal on its side too.
Confronting headlines regarding Britain’s departure from the EU have roiled the Forex market, with GBP/NOK retreating over 4% since its December 13th high of 12.215, also a level unseen since June 23rd 2016.
Meanwhile, Norway appointed on December 18th Sylvi Listhaug, an outspoken right-wing lawmaker, as its new oil and energy minister. Listhaug will be responsible for managing Norway’s majority stake in oil company Equinor, will grant licenses to wind farms and will decide where oil firms are allowed to drill.
In an interview with private broadcaster TV2 in August, Listhaug said that Norway was in no need of either onshore or offshore wind power, while referring to wind turbines as ”white monsters”. Norway produces almost 100% of its electricity from hydropower dams.
The country’s ruling four-party coalition has to cope with an intense debate over how far north companies should be allowed to drill. The Liberals, who are in control of the environment ministry, push for drilling restrictions, an initiative strongly opposed by the Listhaug’s right-wing Progress Party.
From a macroeconomic perspective, the United Kingdom and Norway are not scheduled to release any relevant reports today.
GBP/NOK was up 0.09% to 11.5970 in late Asian session on Tuesday, not far from October 15th low (11.5443).