The British pound recovered some ground against the Norwegian krone during the Asian session, after a strong sell-off following Bank of England’s dovish hold. Lower energy prices have also not been supportive for the krone, which traded at 11.7030 as of 7:00 a.m. London time.
Let’s take a look at the factors that have been driving the pound US dollar exchange rate across the week.
Sterling might also be gaining on reports that the UK’s Conservative Party was ahead of Labours ahead of the December election. According to polls published over the weekend, Conservatives had 41% support compared with 29% for the Labour Party.
In the meantime, the ruling Conservatives criticized Labour’s extravagant spending plans according to which the party plans to spend $1.5 trillion over five years. Conservatives are claiming that this level of spending “is absolutely reckless” and would plunge the UK into an economic crisis.
The latest Commitment of Traders report showed that investors continued to cut their bearish bets on the pound, reducing their short positions by 5,553 contracts and their long positions by only 2,173 contracts.
As the pair is consolidation last week’s losses, markets are awaiting important reports from both the UK and Norway. The pound could lift off on today’s GDP report at 9:30 a.m., which is expected to show a significant rise of 0.4% for the last quarter compared with a 0.2% fall in the previous reporting period. If the report comes in below zero, the UK would technically be in a recession.
In Norway, all eyes will be on inflation reports, with markets forecasting a rise in yearly CPI and core inflation numbers to 1.8% and 2.3%, respectively.
Technicals show a bearish momentum in the pair after the recent double top pattern and triangle breakout led to a sell-off in the pair. A bearish RSI divergence is still active as the pair is completing a pullback to a horizontal resistance level that aligns with the October swing low around 11.71. To the downside, last week’s low of 11.62 acts as a short-term support level.