EUR/GBP stays volatile near term – Danske Bank

Senior Analyst at Danske Bank Morten Helt noted the European cross faces further volatility in the next months stemming from the Brexit negotiations.

Key Quotes

“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”.