The British pound continued to trade higher against the Norwegian krone on Monday after reaching multi-year highs in the previous trading week.
It’s election week in the UK. The recent demand for sterling has been largely fueled by polls that the ruling Conservative Party is on track to win a majority in the Parliament on Thursday — a majority that would likely lead to the Parliament voting to leave the European Union by January 31.
Surveys conducted on Sunday all put the Tories ahead of the Labour Party once again. Corbyn’s Labours were starting to close the gap in the last few weeks, but apparently not by enough yet to avoid a majority of Johnson’s Conservative Party.
“There’s a spread in the polling, but it’s between polls that show Johnson getting a big majority, polls that show a medium majority and polls showing it’s touch-and-go for a majority,” said YouGov’s Anthony Wells. However, polls don’t have to always be right, as shown by the experience of the 2017 election.
The latest futures positioning reports by the CFTC showed that investors were cutting their bearish bets in the pound ahead of the UK election. The CoT report showed that bearish bets in the GBP were reduced by $501 million in the last week through Tuesday, taking the net total short positioning to around $2.4 billion.
While the pound continues to trade at elevated levels against the krone ahead of Thursday, it seems that a Conservative win has been largely discounted by the markets. Headlines continue to pose a risk for the pair, especially if fresh reports show that the anticipated Conservative majority could be in danger.
Until then, the GBP/NOK pair is trading with an overall bullish bias, with Friday’s pullback to the October 29 high of 11.9710 signaling further strength ahead of the election. As of 7:00 a.m. London time, one pound bought 12.0218 Norwegian krones.