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Sterling was extending gains against the Norwegian krone in yesterday’s trade after Brexit Party leader Nigel Farage formed an election pact with the Conservatives, insisting he wouldn’t fight Boris Johnson in the upcoming December election.
Brexit Party’s announcement has substantially increased Johnson’s chances to form a majority in the Parliament and to deliver on his promise to take Britain out of the EU since Euroskeptic voters don’t have much choice but to vote for the Conservative Party now.
The British pound rose on the news and continued to do so during the Asian session, trading at 11.79 against the Norwegian krone as of 7:00 a.m. London time. The latest polls by Reuters economists showed that the median probability of a no-deal Brexit dropped to 20% – the lowest level since May — as Brexit concerns are easing ahead of the election.
Another impulse for the GBP/NOK pair has been lower oil prices, with Brent crude down around 0.40% yesterday, and the Norwegian GDP report that showed a slow-down in economic growth. The report came in at 0.7%, below market expectations of a 0.8% rise. Markets are now awaiting the United Kingdom’s CPI numbers, with forecasts of a slight fall to 1.6% year over year, down from previous month’s reading of 1.7%.
From a technical standpoint, the GBP/NOK pair completed a pullback to a previously-broken triangle pattern where sellers might join the market again. A break above the lower triangle support-turned-resistance could push the price up to the November 6 high of 11.85, followed by the upper triangle resistance at around 11.90. To the downside, we expect the November 7 low of 11.62 to keep supporting the pair, especially as fundamentals are gradually tilting in favour of sterling.
