EUR/GBP eyes 0.74 in 6-month – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, believes the cross could head towards the 0.74 handle in the medium term and following a ‘Remain’ win in the UK referendum.

Key Quotes

“Longer term, the outlook for EUR/GBP very much depends on the outcome of the EU referendum”.

“In our main scenario, we assume a status quo for the UK, meaning that people vote to remain in the EU. This implies that the GBP appreciates immediately after the referendum”.

“According to our estimation of Brexit risk premium, EUR/GBP would most likely fall to 0.7420-0.7660 immediately after the referendum in case of a ‘stay’ outcome and we have thus lowered our 3M target from 0.80 to 0.76 as the three-month horizon is now after the election date”.

“Longer term, we project further EUR/GBP downside driven by relative growth and relative monetary policy. We target EUR/GBP at 0.74 in 6M and 0.75 in 12M but stress that these forecasts are subject to significant digital risk”.