Senior Analyst at Danske Bank Morten Helt noted the European cross faces further volatility in the next months stemming from the Brexit negotiations.
“Conclusion. Brexit negotiations are entering a critical phase and we expect EUR/GBP to remain very volatile and sensitive to Brexit news. We target 0.89 in 1-3M, with risks skewed on the upside in the very near term ahead of the annual UK Conservative Party Conference (30 September– 3 October), 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 curb EUR/GBP upside potential butBrexit is set to be a 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 trade lower eventually, driven by Brexit clarifications and fundamental valuations. We target EUR/GBP at 0.84 in 6M and 0.83 in 12M”.
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