EUR/GBP seen lower in 2018 – Danske Bank

The outlook for the European cross next year keeps pointing to lower levels, according to Senior Analyst at Danske Bank Jens Pedersen.

Key Quotes

“EUR/GBP bounced as the EU and UK failed to reach a complete Brexit deal yesterday. The market was clearly positioned for a breakthrough in Brexit talks, and EUR/GBP could continue higher today as investors digest the disappointment”.

“It remains uncertain whether the last remaining issues can be resolved before the EU summit on 14 December where EU leaders will determine whether negotiations can move to the second phase”.

“We maintain the view that while a deal on the divorce (phase one) is important and necessary in order to proceed negotiations, it is the future relationship and in particular a reassurance that a cliff edge Brexit is avoided that matters more for the Brexit risk premium and the longer-term outlook for GBP”.

“Hence, the case for a lower EUR/GBP in 2018 remains intact, but we still see the cross within the 0.8650-0.90 range in the coming one to two months”.