After finishing the year as the second best performing major currency of 2019, the British pound has been on the back foot from day one in the New Year as renewed tensions between the US and Iran are set to dominate the market this week.
Safe-havens and crude oil surged in the wake of escalating tensions in the Middle East after the US killed a key Iranian military commander in Iraq. Iran threatened with immediate retaliation and abandoned the 2015 Nuclear Dear that set uranium enrichment limits for the country.
Brent crude rose more than 6% following the news which could support the Norwegian krone in the days ahead. As of 7:00 a.m. London time, the pair traded at 11.58.
The Norwegian manufacturing PMI for December came in at 55.5 on Thursday, higher than the November reading of 53.8, and was boosted by increases in production, employment, and new orders. The final services PMI for December will be reported later today, with expectations set at 49.1 index points.
The UK final manufacturing PMI for December, which was also released on Thursday, was mostly in-line with market expectations with a reading of 47.5.
From a technical standpoint, the British pound vs Norwegian krone pair trades inside a strong short-term downtrend that has sent the 14-day RSI near oversold levels with a reading of 38.3.
The pair completed a pullback to the November 8 resistance level around 11.65 which could provide some selling pressure in the coming days. However, pound bears should be aware of the strong longer-term support zone at the 11.50 level that aligns with the March 2019 and May 2019 highs.
With renewed tensions in the Middle East, international factors may also play an important role in the pair’s performance in the days ahead.