EUR/GBP to trade lower and plunge towards 0.83 on a 12-month horizon – Danske Bank

EUR/GBP has moved down to 0.85 on higher-than-anticipated inflation and the Fed’s hawkish shift. Analysts at Danske Bank remain bullish on the pound, as they are still more upbeat on the UK than on the euro-area forecasting EUR/GBP at 0.83 in 12 months.

More hawkish Fed and BoE to support sterling

“We expect the UK recovery to continue in H2. The historical relationship between new cases and hospitalisations has weakened significantly due to the vaccines and the UK is going to re-open fully on 19 July.” 

“Inflation has been higher than anticipated in recent months supporting our view that the Bank of England will tighten monetary policy earlier than the ECB.”  

“We still expect EUR/GBP will trade lower in coming months, as we remain more upbeat on the UK economic outlook than the euro area. We also think a more hawkish Fed and BoE will support GBP.”

“We target 0.83 in 12M.”