EUR/GBP seen around 0.69 in 6-m – Danske Bank

FXStreet (Edinburgh) - Senior Analyst at Danske Bank Morten Helt expects the cross to head towards the 0.69 area in the medium term.

Key quotes

We have revised our 1 to 6 months EUR/GBP forecast slightly higher as the support to the GBP stemming from relative rates might kick in a bit later than previously estimated”.

“However, in our view, the BoE is still priced much too dovishly (first hike set for Q3 16) and we expect the combination of additional EUR weakness caused by the ECB’s ‘hot potato effect’ coupled with a re-pricing of BoE will keep EUR/GBP under pressure for now and we target EUR/GBP at 0.69 in 6M (0.68)”.

“The upcoming election in the UK on 7 May could be a source of GBP weakness and excessive volatility - even after the election, and we have revised our 1 and 3 months targets slightly higher to 0.72 and 0.70 respectively (from 0.70)”.

“On a 6 to 12 month horizon, we expect EUR/GBP to stabilize and eventually move higher. We still target the cross as 0.71 in 12 months”.