The British economy is grappling with CORVID-19 and Brexit. What is the near-term outlook for EUR/GBP?
Here is their view, courtesy of eFXdata:
Nordea Research discusses GBP outlook and now expects EUR/GBP to rally through 0.95 over the coming 3 months.
“Turning to the Sterling, we think there are especially three factors why it has been disliked by investors and has traded somewhat in tandem with G10 commodity currencies during the Corona crisis:
–The UK has a twin deï¬cit with the biggest current account deï¬cit (as % of GDP) in G10. A constant capital inflow is therefore needed to underpin the GBP which is challenging in the present “dash for cash situation”
—The UK has a large and systemic important banking sector which is particular exposed in times of credit crunches and disturbances in the global funding system (containing Libor-OIS and basis swaps spreads via more USD liquidity is key)
—After years of Brexit uncertainty and low returns, the sterling has lost some of its appeal as a major reserve currency,” Nordea notes.
“We increase our EUR/GBP forecast to levels around 0.95 for the short-term and consider GBP very vulnerable to further setbacks in the Corona crisis,” Nordea adds.
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