7 Aug 2015
EUR/GBP seen at 0.69 in 3-month – Danske Bank
FXStreet (Edinburgh) - Morten Helt, Senior Analyst at Danske Bank, expects the cross to grind lower towards the 0.69 area in 3 to 6 months.
Key Quotes
“Bank of England (BoE) surprised in a dovish direction yesterday with a split vote of 8-1 where we had expected 7-2”.
“The lower oil price and stronger GBP were the main reasons why BoE hesitated”.
“Following the BoE decision, the GBP sold off sharply. According to our short-term financial models, price action in the FX market seems fair given the decline in UK yields”.
“However, EUR/GBP still trades 1.3 standard deviation above our model’s short-term estimate of 0.69. Fundamentally, we still expect EUR/GBP to trade lower in the coming months driven by relative interest rates”.
“We target the EUR/GBP at 0.69 in 3M to 6M but stress that the risks remain that the cross temporarily undershoots our targets”.
Key Quotes
“Bank of England (BoE) surprised in a dovish direction yesterday with a split vote of 8-1 where we had expected 7-2”.
“The lower oil price and stronger GBP were the main reasons why BoE hesitated”.
“Following the BoE decision, the GBP sold off sharply. According to our short-term financial models, price action in the FX market seems fair given the decline in UK yields”.
“However, EUR/GBP still trades 1.3 standard deviation above our model’s short-term estimate of 0.69. Fundamentally, we still expect EUR/GBP to trade lower in the coming months driven by relative interest rates”.
“We target the EUR/GBP at 0.69 in 3M to 6M but stress that the risks remain that the cross temporarily undershoots our targets”.