According to analysts from Danske Bank the EUR/GBP pair is more or less solely in the hands of the Brexit-outcome. They see that if a simple free-trade agreement between the UK and the European Union is reached, the pair could move towards 0.86; and in a no-deal scenario, they expect EUR/GBP to jump markedly higher without breaching parity.
“In line with our expectation, negotiations have extended into November and we are still yet to see a Brexit agreement. We expect a deal in the second half of November but will be more concerned if there is no progress around 1 December, which we believe would weigh on GBP if this is the case.”
“We expect the Bank of England to keep policy rates unchanged throughout our forecast horizon despite increasing discussions about whether to cut into negative. In the event of no deal, we expect a significant cut to -0.5%.”
“As our base case remains a simple free-trade agreement covering goods and that a deal will be finalised over the next two to three weeks, we expect EUR/GBP to move lower in the very near term, supported by the positive vaccine news favouring cyclical currencies. We forecast 0.86 in 1-12M, which we believe will be the new trading midpoint in the coming year, although we believe risk is skewed towards it going lower than 0.86 in the very-near term in the event of a deal. If we are wrong and instead head for no deal, we believe EUR/GBP will move markedly higher (yet stay below parity).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.