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The British pound gave back most of its yesterday’s gains against the Norwegian krone this morning after a widely-anticipated poll showed that Johnson’s lead is narrowing.
Just one day before the election, a YouGov opinion poll suggested that the Conservatives will win 339 seats in the House of Commons, followed by Labour’s 231 seats, SNP’s 41 seats and the Liberal Democrats’ 15.
According to the survey, Boris Johnson’s results are slashed by half compared to YouGov’s previous poll two weeks ago, which showed a majority of 68 seats. Still, the results also signal that the Labours are a long way short of winning a majority, even though their results have been steadily improving.
Market bets that the Tories will win a clear majority and “get Brexit done” by January 31 have pushed the British pound to a multi-year high against other majors, making it the best-performing currency with a 6% gain since September. However, this makes the pound extremely vulnerable to any unexpected outcomes at the election on Thursday.
In addition, even if Johnson manages to win a majority, the clock is ticking for a trade arrangement between the UK and the European Union by the end of 2020. Any prolonged uncertainties — especially if the US and China fail to agree upon a phase-one deal — could stimulate the Bank of England to cut rates which would drag the pound lower.
There are no market reports of note from the UK and Norway today. Energy prices were slightly lower this morning, which could put some downward pressure on the krone in today’s trade.
From a technical standpoint, the November upturn in the GBP/NOK pair is slowly becoming overstretched with the RSI nearing overbought levels and forming a bearish divergence. Yesterday’s pinbar pattern suggests that buyers are rejecting higher prices at the moment, which could trigger a retest of the December 6 low of 11.97, especially if profit-taking activities accelerate ahead of the election. As of 7:00 a.m. London time, one pound bought 12.0540 Norwegian krones.
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