EUR/GBP seen around 0.83 in 12-month – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, believes the European cross should grind lower towards the 0.83 area within a year’s view.

Key Quotes

“With an August rate hike still in sight in our view we see relative interest rates as neutral for EUR/GBP for now, but expect GBP to eventually gain support from the rate channel. We target 0.88 in 1M and 0.8650 in 3M”.

“Longer term, Brexit still remains a key driver for GBP, and while uncertainty remains high, we still expect EUR/GBP to eventually trade lower driven by Brexit clarifications and fundamental valuations. The turn in capital flows and FDI flows back into the UK, as indicated in the latest balance of payment data, suggest that a key headwind to GBP seen in Brexit is reversing, supporting the case for additional GBP appreciation over the medium term. We target EUR/GBP at 0.84 in 6M and 0.83 in 12M”.