The GBP/NOK currency pair extended a pullback from a 1 1/2-week high of 13.2944 on Monday, after Norwegian GDP data and as renewed expectations of a Bank of England rate cut mounted pressure on the Pound.
The Bank of England left its benchmark interest rate intact at 3.75% at its February 5th meeting, in line with market consensus.
Yet, it was a narrow 5 to 4 vote, as officials weighed easing inflation pressures against risks stemming from a weakening economy.
Four members voted in favor of a 25 basis point cut, which highlighted growing divisions within the Monetary Policy Committee.
This reinforced perceptions of a more dovish stance and contributed to GBP softness.
“We continue to expect the next rate cut in March. After that, we think the BoE will deliver a long pause before resuming policy normalization in early 2027 (terminal rate of 3.00% by mid-2027),” Dani Stoilova, UK and Europe economist at BNP Paribas Markets 360, commented.
Meanwhile, GDP in Norway’s mainland, which does not take into account the petroleum-based offshore sector, grew at a quarterly rate of 0.4% in Q4, following a 0.1% growth in the prior three months.
It has been the fourth straight quarter of expansion, driven by higher gross fixed capital formation, household consumption and government spending.
In annual terms, mainland GDP grew 1.9% in the fourth quarter.
However, overall, the Norwegian economy contracted 0.3% quarter-on-quarter in Q4, following a revised up 1.3% growth in the previous quarter. GDP was mostly weighed down by a drop in petroleum activities and ocean transport.
The GBP/NOK currency pair was last down 0.24% on the day to trade at 13.1491.
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