EUR/GBP: Difficult to see what can support the pound – Danske Bank

Looming Brexit trade talks mean renewed uncertainty in 3-6M, economists at Danske Bank apprise.

Key quotes

“While the UK may be approaching the peak in virus figures, an exit strategy for how to open up the economy is still missing. This could prolong the economic pain near-term.”

“We expect the BoE to keep policy rates unchanged through our forecast horizon.”

“The pandemic means both the EU and the UK have been preoccupied with issues other than Brexit trade agreement talks; this increases the risk of a big negative UK trade shock in 2021.”

“We see EUR/GBP at 0.90 in 3M and 6M followed by a move towards 0.86 based upon the assumption of a trade deal in 12M.”