EUR/GBP sell strength beyond 0.88 – Danske bank
|Chief Analyst at Danske Bank Arne Rasmussen, recommended selling the European cross on occasional upticks beyond the key 0.8800 hurdle.
Key Quotes
“EUR/GBP has stabilised after last week’s rally, which was ignited by Mark Carney’s comments on the market pricing of a rate hike in May”.
“GBP may have lost momentum after a period of strong performance since the beginning of March, but we do not think that GBP has lost its shine. We still expect the BoE to hike in May, which is now only priced with a 50/50 probability, and given the relatively subdued pricing of future BoE rate hikes (first full 25bp hike priced in October), we see room for GBP appreciation both in the short term and longer term”.
“Investors are still stretched long GBP according to the IMM, which is a warning light for long GBP. Note however that the IMM data was collected on Tuesday and some GBP longs clearly have been flushed out after since Carney’s comments Thursday night. Hence, from a risk reward, we would consider selling EUR/GBP if the cross bounces above 0.88”.
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