EUR/GBP has stabilised just below the 0.89 figure after GBP gained on Tuesday on the news that the UK Prime Minister relegated the Brexit Department, notes the research team at Danske Bank.
Key Quotes
“We expect EUR/GBP to trade slightly lower going into the Bank of England meeting next week where we expect the BoE to hike the Bank Rate by 25bp. However, given that a rate hike is almost fully discounted in the market, we would expect any rally in GBP to prove short-lived.”
“Hence, we look for EUR/GBP to remain range bound near term with Brexit uncertainty expected to remain a key source of volatility.”
“Longer term, we still expect EUR/GBP to eventually trade lower driven by Brexit clarifications and fundamental valuations. We target EUR/GBP at 0.8650 in 3M, 0.84 in 6M and 0.83 in 12M.”
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