EUR/GBP expected to grind lower and test 0.83 in 12-month – Danske Bank

Pablo Piovano FXStreet

Morten Helt, Senior Analyst at Danske Bank, believes the European cross is poised for a drop to the 0.83 area in the long term.

Key Quotes

“Brexit negotiations are now entering a critical phase and we expect EUR/GBP to remain very volatile and sensitive to Brexit news in coming months. We target 0.89 in 1-3M, with risks skewed to the upside in the very near term ahead of the annual UK Conservative Party congress (30 Sept-3 Oct), which in our view is an important hurdle and potential source of volatility, before the final Brexit negotiations”.

“As such, a stretched short speculative GBP positioning and fairly neutral UK interest rates should help to curb EUR/GBP upside potential. However, Brexit will be key driver and stretched positioning is not an obstacle for a significant break higher in EUR/GBP if the likelihood of a ‘no deal’ scenario increases”.

“Longer term, we still expect EUR/GBP to eventually trade lower driven by Brexit clarifications and fundamental valuations. We target EUR/GBP at 0.84 in 6M and 0.83 in 12M”.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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