EUR/GBP: Brexit uncertainty is back on the agenda – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, notes that the EUR/GBP has increased substantially since the beginning of 2017, as markets have turned their focus back to the Brexit theme.

Key Quotes

“We still see potential for further GBP weakness in coming months as the triggering of article 50, which we expect by the end of March, moves closer. We have lifted our 1M target to 0.89 (previously 0.84) and 0.88 (0.87) in 3M but stress that the risk is skewed on the upside relative to our forecasts.”

“Longer term, we expect EUR/GBP to stabilise within the 0.84-0.88 range targeting the cross at 0.86 in 6M and 0.86 in 12M. As more clarification on the outcome of Brexit negotiations becomes available, we see a case for GBP strengthening due to positioning and valuation as Brexit uncertainty declines. This represents downside risk to our 6-12M forecast.”