EUR/GBP to move significantly lower towards 0.86 and stay there, in the event of a deal – Danske

Analysts from Danske Bank forecast the EUR/GBP pair will trade around 0.86 over the next months if an agreement between the European Union and the United Kingdom is reach. 

Key Quotes: 

“We expect the outcome of the ongoing Brexit negotiations to determine the fate of the GBP. We believe it is 50-50 whether or not we will get a deal but the most recent comments have been more encouraging, suggesting a deal, at least on the margin, is more likely than not.”

“In the event of a deal, we believe EUR/GBP will move significantly lower towards 0.86 supported by investors pricing out the Brexit risk premium, vaccine-driven reflation and the UK outperforming the euro area. In the event of no deal, we expect EUR/GBP to move towards but remain below parity, targeting 0.97.”

“We believe the new ‘equilibrium’ exchange rate will become clearer in the new year when we know more.”