EUR/GBP sidelined near term – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, expects the European cross to extend the consolidative theme for the time being.

Key Quotes

“A BoE rate hike in November seems to be consensus in the market and priced with an 85% probability in the UK money market. Hence, while GBP could see some support going into the 2 November BoE meeting, we see little prospect of EUR/GBP breaking below 0.87 on the announcement due to the combination of already-stretched BoE pricing and long speculative GBP positioning. We still see EUR/GBP trading in the range of 0.87- 0.90 in coming months, targeting 0.88 in 1-3M (previously 0.87)”.

“Longer term, we still see potential for a further decline in EUR/GBP driven by possible clarification on Brexit negotiations and valuations. However, with the ECB moving towards an exit as well and as relative growth is set to remain EUR/GBP positive, we see only modest downside potential in the year ahead. We target 0.87 in 6M (previously 0.86) and 0.86 in 12M”.