17 Mar 2015
EUR/GBP expected to resume the downside – Danske Bank
FXStreet (Edinburgh) - Senior Analyst at Danske Bank Morten Helt argued the European cross could head lower backed by prospects of a sooner than estimated rate hike by the BoE.
Key Quotes
“Fundamentally, the UK economy is expected to continue to recover at a solid pace and we still look for the first hike to arrive in August”.
“If we are correct, the BoE is priced much too dovishly (first hike set for Q1 16) and we see more EUR/GBP downside potential as markets call for a re-pricing of MPC policy in a more hawkish direction”.
“Hence, EUR weakness coupled with continued USD performance ahead of the first Fed hike in June and not least an ongoing improvement of the UK labour market will keep EUR/GBP under pressure for now”.
“The upcoming general election in the UK on 7 May could be a source of GBP weakness or volatility. However, GBP softness should be a concern in particular for GBP/USD, where we look for additional downside in the coming months”.
“On a 6 to 12 month horizon, we expect EUR/GBP to stabilise and eventually move higher as the eurozone recovers”.
Key Quotes
“Fundamentally, the UK economy is expected to continue to recover at a solid pace and we still look for the first hike to arrive in August”.
“If we are correct, the BoE is priced much too dovishly (first hike set for Q1 16) and we see more EUR/GBP downside potential as markets call for a re-pricing of MPC policy in a more hawkish direction”.
“Hence, EUR weakness coupled with continued USD performance ahead of the first Fed hike in June and not least an ongoing improvement of the UK labour market will keep EUR/GBP under pressure for now”.
“The upcoming general election in the UK on 7 May could be a source of GBP weakness or volatility. However, GBP softness should be a concern in particular for GBP/USD, where we look for additional downside in the coming months”.
“On a 6 to 12 month horizon, we expect EUR/GBP to stabilise and eventually move higher as the eurozone recovers”.