EUR/GBP still seen at 0.90 in 6-m – Danske Bank

Sverre Holbek, Senior Analyst at Danske Bank, believes the European cross could still reach the 0.90 area in the medium term.

Key Quotes

“Yesterday also saw EUR/GBP dipping below 0.85 for the first time since mid-September, reflecting the recent turn of events where a Republican victory has sparked speculations of a closer connection between Donald Trump and UK Prime Minister Theresa May”.

“We think the repricing of the ‘Brexit’ risk premium is justified and given the heavy short GBP positioning we could see the GBP short covering continue near term”.

“We do, however, still think weak UK fundamentals justify a weaker GBP to offset the negative consequences of a Brexit, and we expect renewed pressure on GBP on a 3-6M horizon in the run up to when the UK government is likely to trigger Article 50. We target EUR/GBP at 0.90 in 6M”.