EUR/GBP: Guided by the politics – Danske Bank


Jakob Christensen, chief analyst at Danske Bank, points out that yesterday, EUR/GBP traded as elevated as 0.884 but the GBP reversed most of the day’s losses in late hours and view this spot level as warranted if one sees a high probability of either (1) a new election and/or (2) a no-deal Brexit realisation in the next one to two months.

Key Quotes

“There are many potential quirks before this could happen and we hence we view the pricing as stretched for now. Put another way, we do not view the political situation (yet) with the same severity as late last year, when the GBP was only slightly weaker than seen today.”

“On this side of summer, we do not expect a convergence towards one of the (pound-negative) Brexit outcomes and hence expect very limited further weakness in the GBP. Rather, from the current level, small changes in the perception of the possibility of a softer Brexit could cause a non-linear reaction in favour of GBP strength.”

“A more pro-Brexit Conservative leader would probably increase the chances of a no deal scenario but the small majority in the House of Commons will likely continue to do as much as it can to avoid this, limiting a strong sell-off beyond knee-jerk reactions. Our base case is that a further Brexit extension beyond 31 October is likely.”

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.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD bounces after upbeat COVID-19 cure news

EUR/USD is trading above 1.13, rebounding from the lows. Gilead reported that its drug Remdesevir substantially reduces mortality among COVID-19 patients. The news boosted stocks and weighed on the dollar. US coronavirus statistics are due out.

EUR/USD News

GBP/USD recaptures 1.26 as the market mood improves

GBP/USD is trading above 1.26 as the market mood improves and the safe-haven dollar retreats. Investors are shrugging off Brexit concerns and focusing on hopes to cure coronavirus. US COVID-19 statistics are due out.

GBP/USD News

XAU/USD consolidates daily gains above $1,800

After advancing to its highest level since September of 2011 at $1,818 on Wednesday, the XAU/USD pair staged a correction and briefly dropped below $1,800 on Thursday.

Gold News

Cryptocurrencies: War for dominance hit the bedrock of the market

Bitcoin tried to regain market share and activated sales in the Altcoin segment. BTC/USD, ETH/USD and XRP/USD are looking for supports and a rebound to push them to new elative highs. The current compression on the XRP/USD chart could trigger an exploding movement.

Read more

WTI once again breaks $40 per barrel after trading lower in early EU trade

There has been quite the bounce in WTI since the EU session after some strong selling pressure during Thursday and overnight. Once again on Friday's session, the price has taken the USD 40 per barrel handle. 

Oil News

Forex MAJORS

Cryptocurrencies

Signatures