EURGBP to remain elevated at 0.88 in the near-term – Danske Bank

Economists at Danske Bank forecast EURGBP at 0.88 in one-month but expect the pair to head lower in the medium to long-term.

Key risk to see EURGBP moving above 0.90 is a sharp sell-off in risk

“In the near-term, we expect fragile risk appetite, too aggressive market pricing on the BoE and lower energy prices to continue to prove a headwind for GBP. We thus forecast EURGBP at 0.88 in 1M.”

“Further out, we remain cautiously optimistic that the cross will head lower as a global growth slowdown and the relative appeal of UK assets to investors are a positive for GBP relative to EUR.”

“The key risk to see EURGBP moving above 0.90 is a sharp sell-off in risk where capital inflows fade and liquidity becomes scares. Other risks are the outlook for the UK economy deteriorating sharply compared to the Euro Area, lower energy prices and renewed escalations in EU-UK tensions.”

“Forecast: 0.88 (1M), 0.88 (3M), 0.87 (6M), 0.86 (12M).”