EUR/GBP expected at 0.84 in 12-month – Danske Bank

Senior Analyst at Danske Bank Morten Helt believes the European cross could retreat to the 0.84 area within a year’s view.

Key Quotes

“We expect the combination of higher UK interest rates and Brexit clarification to move GBP away gradually from fundamentally undervalued levels. In particular, with the BoE now more firmly signalling a gradual hiking cycle, the case for a lower EUR/GBP has strengthened as we now expect the BoE to ‘out-tighten’ the ECB in the coming 12 months”.

“Consequently, on 8 February, we lowered our EUR/GBP forecast to 0.87 in 3M, 0.86 in 6M and 0.84 in 12M. We see risks skewed towards the cross both breaking lower sooner and considerably lower than our forecast indicates. As the market pricing of a May rate hike already looks relatively hawkish, we see limited downside potential in the short term. We target 0.88 in 1M”.