23 Oct 2013
Flash: EUR/GBP potential upside in 2014 – Danske Bank
FXstreet.com (Edinburgh) -Analyst Arne Rasmussen at the Nordic Danske Bank observed many factors that can collaborate with a potential upside of the EUR/GBP during next year.
Key Quotes
“The BoE does not intend to raise the Bank Rate from its current level of 0.50% at least until the unemployment rate has fallen to a threshold of 7%, which is expected to happen in three years’ time. However, due to the strong numbers, the market is pricing in a rate hike much earlier”.
“The strong numbers in the UK currently make a breach of one or more of the ‘knockouts’ more likely. If that happens, a more pronounced GBP appreciation than we forecast could occur. However, there is more room for economic surprises in the euro zone now”.
“On a 12M horizon, GBP will still be exposed to the most dovish G4 central bank after BoJ. Hence, we forecast that EUR/GBP will slowly move higher once again in 2014 and that GBP will stay in fundamentally ‘undervalued’ territory in 2014”.
Key Quotes
“The BoE does not intend to raise the Bank Rate from its current level of 0.50% at least until the unemployment rate has fallen to a threshold of 7%, which is expected to happen in three years’ time. However, due to the strong numbers, the market is pricing in a rate hike much earlier”.
“The strong numbers in the UK currently make a breach of one or more of the ‘knockouts’ more likely. If that happens, a more pronounced GBP appreciation than we forecast could occur. However, there is more room for economic surprises in the euro zone now”.
“On a 12M horizon, GBP will still be exposed to the most dovish G4 central bank after BoJ. Hence, we forecast that EUR/GBP will slowly move higher once again in 2014 and that GBP will stay in fundamentally ‘undervalued’ territory in 2014”.