EUR/GBP likely to gravitate between 0.89-0.90 – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, believes the European cross could extend its sideline theme between 0.89 and 0.90 for the time being.

Key Quotes

“EUR/GBP traded lower yesterday on the back of an unexpected correction of Q2 unit labour costs, which was revised up from 1.6% to 2.4% y/y and as investors digested UK Prime Minister Theresa May comments over the weekend that she plans to remain in charge of the government”.

“Yesterday, the stakes in the Brexit talks were upped after Theresa May outlined a contingency plan for a no-deal scenario, saying that the government is still prepared to walk away from Brexit negotiations without a deal”.

“The fifth round of Brexit negotiations kicked off in Brussels yesterday and focus will be on whether there will be any progress this time”.

“We expect EUR/GBP to remain within the 0.89-0.90 range ahead of the September CPI figures (due 17 October) and the labour market report (due 18 October). From a risk/reward perspective, we still see value in selling EUR/GBP above 0.8950 via a bearish seagull for a move towards 0.87 going into the Bank of England meeting on 2 November”.