EUR/GBP: More upside in store for near term – Danske Bank

Senior Analyst, Mikael Olai Milhøj at Danske Bank, explains that GBP has been the weakest performing currency among the G10s so far this week, and while EUR/GBP fell back below 0.888 yesterday after a test of the technical resistance level at 0.8909 was rejected, they think there is more upside in store for EUR/GBP near term.

Key Quotes

“Market is still pricing in roughly 50/50 for a May hike in the UK. We expect the BoE to take a wait -and-see approach at its MPC meeting tomorrow suggesting only a slim chance of a rate hike in H1, in our view. Moreover, we still think that positioning and current ‘low’ Brexit risk premium represents upside risk factors for EUR/GBP in the near term – especially as political uncertainty in the UK seems to be gaining. Strategically, we remain bullish GBP on a medium term horizon and we would consider selling EUR/GBP if the cross breaks into the high end of the 0.8650- 0.90 range, which we still expect to hold.”