EUR/GBP bounced above 0.89 yesterday driven by the EUR rally, which was triggered by hawkish ECB headlines, points out Senior Analyst, Jens Nærvig Pedersen at Danske Bank.
“In the near term, EUR/GBP is likely to remain in the hands of investor appetite for EUR and Brexit news, and we still look for the cross to remain within the 0.8650- 0.90 range. Longer term, we still see potential for a break lower in EUR/GBP driven by possible clarification on Brexit negotiations and valuations. However, yesterday’s ECB minutes and the rally in EUR is a reminder that while GBP is set to strengthen on a lower Brexit risk premium, a general EUR recovery driven by the ECB moving towards an exit could potentially limit the downside potential.”
“We target 0.87 in 6M and 0.86 in 12M, but stress the risks are that a break lower in the cross could come sooner than our forecast indicates.”
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