The British pound gave back most of its gains against the Norwegian krone in yesterday’s trade as renewed Brexit uncertainties keep weighing on sterling.
After the UK parliament approved a December general election, markets and investors are now assessing what impact each election outcome could have on the UK and the pound. The currency rallied around 5% in the past month, pushing its value of multi-month highs, but analysts believe that the renewed uncertainty could prevent fresh investment flows into sterling.
The worst-case scenario is that a no-deal Brexit could be back on the table again, as voters decide whether to support Corbyn’s Labour or Johnson’s Tories in December.
The Norwegian krone gained against the British pound despite a lower-than-expected change in retail sales, which came in at -0.1% vs. 0.2 expected.
Markets are also awaiting tomorrow’s UK manufacturing PMI, which is expected to fall to 48.2, down from the previous month’s 48.3 reading.
Lower oil prices in yesterday’s trade, while not beneficial for the NOK, weren’t able to prevent the surge of the krone against sterling.
From a technical standpoint, the GBP/NOK pair fell from overbought levels and traded at 11.85, as of 7:00 a.m. London time. Tuesday’s pinbar candle already suggested that buyers were rejecting prices above the 11.90 level, while a bearish divergence in the RSI showed that the recent upturn in the pair was likely overstretched.
While the British pound has recovered some ground against the krone during the Asian session, pushing the pair above yesterday’s high of 11.91 will likely be a tough challenge for pound buyers at the moment. To the downside, yesterday’s low of 11.8360 acts as short-term support.