EUR/GBP: Brexit negotiations are now entering a critical phase - Danske Bank

According to analysts from Danske Bank, the EUR/GBP pair is likely to remain elevated and volatile in coming months. They rose short-term forecasts for the pair. 

Key Quotes: 

“Brexit negotiations are entering a critical phase, which, combined with continued political uncertainty in the UK is likely to remain a key source of volatility in coming months. We think it is unlikely that the EU and UK will reach an agreement in October but expect it to come in December. Hence, EUR/GBP is likely to remain elevated and volatile in coming months and we raise our 1M and 3M forecasts to 0.890 (previously 0.875).”

“We believe that a stretched short GBP positioning and fairly neutral UK interest rates should help curb the upside potential, and we see risks to EUR/GBP as fairly balanced in the near term. Longer term, we still expect EUR/GBP eventually to trade lower driven by Brexit clarifications and fundamental valuations. We target EUR/GBP at 0.84 in 6M and 0.83 in 12M.”