GBP/USD strengthens, EUR/GBP stabilised – Danske Bank

EUR/GBP stabilised yesterday while GBP/USD broke above 1.40 for the first time since the UK’s EU referendum on 23 June 2016 as the USD weakened, notes Senior Analyst, Morten Helt at Danske Bank.

Key Quotes

“Brexit risk premium has declined substantially since New Year and while we remain bullish GBP over the medium term, we think that the repricing of the Brexit risk premium has unfolded at a relatively early stage. According to short-term valuations, EUR/GBP looks increasingly oversold and we see potential for a correction higher in EUR/GBP today as we look for a somewhat weaker UK jobs report compared to consensus.”

“A bounce in EUR/GBP could prove short-lived though, as we still expect a dovish ECB to weigh on EUR tomorrow. Hence, tactically, we like to position for GBP correction risk and a soft ECB by selling GBP/USD.”