EUR/GBP could test 0.90 in the near term – Danske Bank

Senior Analysts at Danske Bank believe the European cross could head towards the key handle at 0.90 the figure in the very near term.

Key Quotes

“EUR/GBP is trading at the high end of the 0.84-0.90 range, which we still see as the main trading range for the cross. The recent leg higher in EUR/GBP has been driven mainly by general EUR appreciation, but June’s weaker-than-expected CPI figures from the UK also pushed the cross higher amid reduced expectations of a BoE rate hike in November”.

“The UK money market implicitly indicates around a 35% probability (9.5bp priced) of a November rate hike, while the timing of the first full 25bp rate hike has been pushed from July 2018 (as of 30 June) to December 2018. We still view the market’s pricing of the BoE as slightly hawkish as we see little prospects of a rate hike this year, and given the current momentum for the euro, we maintain a cautious stance on GBP near term”.

“If we are right that the MPC will vote 6-2 in favour of keeping interest rates unchanged at the August meeting, it is likely to be interpreted as a modestly dovish signal and could trigger a renewed test of the 0.90 level”.