Analysts at Danske Bank expect the EUR/GBP pair to trade sideways until more news arrives on the October Brexit process and a new Prime Minister has stepped up.
Key Quotes:
“EUR/GBP has met our expectation of moving to 0.90 on the back of non-Brexit news and we expect a little more upward drift this side of October. The driver of weakness in GBP has been a marked deterioration of UK data. There are some signs that expectations have now been adjusted.”
“We have started to see weakness in broad USD, which also helps limit EUR/GBP upside, and we expect European data to weaken ahead.”
The range of possible outcomes is likely to be 0.86 (if Brexit-related news improves markedly) to 0.91 (against expectation but if we see much weaker data and/or by pricing a higher probability of no-deal Brexit). We keep the forecast for the central scenario to be EUR/GBP at 0.90 over a full 12-month horizon. Towards year-end, the risk appears slightly skewed towards GBP strength and peak volatility, in our view.”
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