EUR/GBP seen at 0.90 in 6-month – Danske Bank

Analysts at Danske Bank now see the European cross edging higher towards the 0.90 mark in the medium term.

Key Quotes

“We are adjusting our EUR/GBP forecasts in line with what we communicated before and immediately after Brexit. We now forecast EUR/GBP at 0.86 in 1M, 0.88 in 3M, 0.90 in 6M and 0.88 in 12M”.

“Near-term, we expect prolonged political uncertainty will weigh on the UK economy and interest rate policy. The UK runs a current account (CA) deficit around 5% of GDP. Given uncertainty about near-term FDI and portfolio flows into the UK, the CA will have to adjust, which should imply a sharp fall in domestic demand and a weaker GBP to support exports”.

“Longer-term, we expect the GBP will stabilise to some extent given attractive valuations”.