Analysts at Danske Bank see the pair EUR/GBP trading around 0.83 in a one to three month period but ticking towards 0.85 in six months.
Key Quotes:
“EUR/GBP is now at 0.83 following the Johnson victory. Looking ahead, it now seems clear the withdrawal agreement will get through Parliament, meaning we need some rather dire economic news to contemplate taking EUR/GBP higher near term.”
“We expect political risks to continue to bog down the economy and expect the Bank of England to add some fuel with a rate cut next year. Near term, we look for Sterling to move sideways at current levels. Although we expect a subdued economy to provide weakness in H2, this is not key to current EUR/GBP pricing.”
“Our revised EUR/GBP forecast is 0.83 in 1M and 3M, 0.85 in 6M and 0.86 in 12M. To take EUR/GBP notably lower, three things need to happen: (1) expansive fiscal policy must be enacted; (2) we need a rebound in soft and hard data and (3) the withdrawal agreement needs to be approved by Parliament. We remain sceptical as to the ease of reaching a UK-EU foreign trade agreement, but such concerns are unlikely to affect EUR/GBP until H2 next year.”
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