EUR/GBP to move lower as pound still set to benefit from faster vaccinations – Danske Bank

The cyclical GBP has extended its strong performance on the strong UK vaccination process and higher growth expectations which makes economists at Danske Bank forecast the EUR/GBP pair at 0.83 in 6-to-12 months.

Key quotes

“The UK is gradually reopening supported by fast vaccinations, which, combined with businesses getting used to the new EU-UK trading relationship, means that the outlook for the UK economy looks much brighter. We expect the UK economy will outperform the euro area this year, which supports our view of a lower EUR/GBP.” 

“Eventually, the BoE is likely to tighten monetary policy earlier than the ECB, which marginally supports a lower EUR/GBP.” 

“We expect GBP can strengthen further this year but we also recognise that it has come a long way with a lot of positivity already priced in.

“We will not be surprised if GBP takes a breather near-term fluctuating within the 0.85-0.865 range.” 

“We have our 1-3M forecast for EUR/GBP at 0.85. We expect EUR/GBP to move lower again and forecast 0.83 in 6-12M.”