Over the past month, EUR/GBP has moved lower. The cross is currently trading just above the 0.86 mark. Economists at Danske Bank analyze the pair’s outlook.
GBP headwinds to persist
We expect the UK economy to perform relatively worse than the Euro area and expect relative growth outlooks and central bank pricing to weigh on GBP.
We target the cross at 0.89 in 6-12M.
The risks that could see EUR/GBP trade substantially below our projection is if the UK economy considerably outperforms the euro area and/or inflation sustainably returning to target coupled with an acceleration in global growth. While we ultimately believe a sharp repricing of the BoE would prove negative for GBP, it could add support in the near term.
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