EUR/GBP: further upside remains in the pipeline – Danske Bank

Mikael Milhoj, Senior Analyst at Danske Bank, believes there is still room for extra gains in the European cross in the next months.

Key Quotes

“GBP has been the weakest performing currency among the G10s so far this week, and while EUR/GBP fell back below 0.888 yesterday after a test of the technical resistance level at 0.8909 was rejected, we think there is more upside in store for EUR/GBP near term”.

“Market is still pricing in roughly 50/50 for a May hike in the UK. We expect the BoE to take a wait -and-see approach at its MPC meeting tomorrow suggesting only a slim chance of a rate hike in H1, in our view”.

“Moreover, we still think that positioning and current ‘low’ Brexit risk premium represents upside risk factors for EUR/GBP in the near term – especially as political uncertainty in the UK seems to be gaining. Strategically, we remain bullish GBP on a medium term horizon and we would consider selling EUR/GBP if the cross breaks into the high end of the 0.8650- 0.90 range, which we still expect to hold”.