GBP/NOK settles above 1-week low, posts weekly loss

The GBP/NOK currency pair settled above recent low of 13.6926, its weakest level since May 2nd, in the wake of the Bank of England’s and Norges Bank’s policy decisions.

The Bank of England lowered its benchmark interest rate by 25 basis points to 4.25% at its May policy meeting, in line with market expectations.

Two MPC members voted in favor of a larger, 50 bps rate cut, while two other members opted to hold rates at 4.5%.

According to Governor Andrew Bailey, the Committee had room to reduce interest rates due to the ongoing moderation of inflationary pressures. He explained that the preceding weeks had illustrated the global economy’s unpredictable nature, which is why a “gradual and careful approach” was necessary when it came to rate cuts.

Despite that underlying growth remained at a mere 0.1% on quarter, the BoE raised its full-year growth forecast from 0.75% to 1%, attributing the estimate to a better-than-anticipated Q1.

And, inflation is projected to accelerate to as high as 3.5% in Q3 before easing.

In the meantime, Norges Bank left its key policy rate without change at a 15-year high of 4.5% at its May policy meeting, in line with market consensus.

The central bank cautioned that while inflation had eased from the elevated levels from 2023, it still remained above target. Any premature interest rate cuts could lead to inflation resurgence amid the uncertain economic backdrop, Norges Bank also warned.

The GBP/NOK currency pair settled 0.14% lower at 13.7968 on Friday.

The exotic Forex pair lost 0.13% for the week.