EUR/GBP could test 0.92 in 6-month – Danske Bank

Senior Analyst at Danske Bank Morten Helt sees the European cross picking up pace to the 0.9200 area in the medium term.

Key Quotes

“EUR/GBP bounced around 0.8% yesterday from 0.8960 to 0.9040, probably supported by the news that Mark Carney has extended his term to the end of June 2019 and under the assumption that the BoE under Carney’s continued leadership will continue its easing bias, standing ready to support the economy through further easing if needed – despite inflation being expected to increase above the 2% target over the coming year”.

“In our view, it is too early to rule out that the economy could slow due to the higher degree of uncertainty, and we still see more than a 50/50 chance of a rate cut at the next big meeting in February, but it depends on whether the economy slows in Q4”.

“In respect of EUR/GBP, we still see more upside potential on a three to six month horizon. We target 0.92 in 6M but stress that risks are skewed towards the cross overshooting our targets. In the very short term, risks are more balanced as Brexit risks has been repriced and we expect EUR/GBP to trade mostly sideways in the 0.89-0.91 range”.