GBPNOK Gains After Norwegian Unemployment Edges Higher
GBPNOK was slightly higher on the day as data showed a small rise in Norwegian unemployment for August. The market was expecting a drop in the unemployment rate to 5.1% from 5.2%. But, the index went the other way and we saw a 5.3% print.
Unemployment in Norway was at 3.5% in February before the effects of the coronavirus kicked in. Norway slashed its interest rate from 1.5 to 0 in order to tackle the slowdown in the economy, which fell 4.7% in the second quarter. Following the rate cut, inflation has rebounded to 1.6% and this will give the central bank a headache over the future path of rates as the country enters a period of stagflation.
Despite the troubles in Norway’s economy, the United Kingdom isn’t in great shape shape. Interest rates are slightly higher at 0.1%, but GDP was around 20% lower in the second quarter and the most recent unemployment figure saw a jump from 4.1 to 4.5%. The U.K. government debt-to-GDP is double that of Norway at 80% versus 40% and the scandinavians have a huge sovereign wealth fund to tap if they need support.
Brexit is also still a risk to the pound and talks have restarted after a week of stalemate followed the EU summit, which failed to see any new agreement. The two sides only have weeks to agree a deal with any agreement needing time to be legally approved. The risk of an economic shock as we enter 2021 is not what many are expecting as they try to put the woes of 2020 behind them.
GBPNOK Technical Outlook
The GBPNOK has been consolidating since the late-September highs at 12.30. The pair is now testing the resistance at 12.20 and would need to clear this to see an advance to the September high. There is a danger of a double top at this level and today’s candle would be bearish if it closed here. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.