GBP fragile, looks to Brexit – Danske Bank

Analyst at Danske Bank Aila Mihr assessed the recent performance of GBP and the prospects for EUR/GBP in the next months.

Key Quotes

“GBP is likely to remain volatile and very sensitive to Brexit-related news ahead of the EU Summit next week. The market’s expectations of further progress in negotiations have eased slightly, but the cross would still spike higher if EU leaders decide that there has not been sufficient progress made to proceed to the second face of negotiations”.

“In case of positive surprises, EUR/GBP could decline and test the key support level at 0.8746. All in all, however, we still see the cross within the 0.8650-0.90 range in the coming months as it is still too early in the negotiations to reprice Brexit risks significantly”.

‘In particular, a reassurance that a cliff edge Brexit is avoided matters more for the GBP. Hence, longer term, the case for a lower EUR/GBP in 2018 remains intact as Brexit uncertainty clarifies”.