EUR/GBP seen sidelined between 0.84-0.88 in the longer-run – Danske Bank

In view of analysts at Danske Bank, the European cross is seen in a rangebound pattern between 0.84 and 0.88 in the longer run.

Key Quotes

“We think the political risk currently priced on the GBP is at the low end and we still expect the GBP to come under renewed pressure in the run-up to when Article 50 will be triggered. We still expect this to happen in March”.

“We target EUR/GBP at 0.84 in 1M and 0.87 in 3M. Moreover, we think that the market’s pricing of BoE with a full 25bp rate increase priced in by the end of 2018 is a bit on the hawkish side”.

“Longer term, we expect EUR/GBP to stabilise within the 0.84-0.88 range, targeting the cross at 0.86 in 6-12M. As more clarification about the outcome of the Brexit negotiations becomes available, we see a case for GBP strengthening due to positioning and valuation as Brexit uncertainty declines. This represents a downside risk to our 6-12M forecast”.