EUR/GBP to trade lower at 0.88 on a trade deal in Q4 – Danske Bank

Economists at Danske Bank still expect EUR/GBP to trade around 0.90 until a Brexit-deal is agreed but the latter is now in sight on a three-month horizon and they roll the forecast profile to target EUR/GBP towards 0.88 over the autumn.

Key quotes

“GBP remains caught in the middle of risk sentiment and Brexit with the latter set to get more attention near-term. We still expect EUR/GBP to trade around 0.90 until a deal is agreed – likely mid-late autumn – but the cross may go as high as 0.92 on setbacks in risk of Brexit.” 

“Our base case remains a simple free trade agreement covering goods and we expect the cross to move lower to around 0.86 when a deal is in sight.”

“We lower our three-month forecast to 0.88 (prev 0.90) as this is now the horizon where a deal could land. We keep our six-to-twelve forecast at 0.86.”