EUR/GBP trendless and volatile – Danske

By FXStreet Analysts from Danske Bank see the EUR/GBP trendless and volatile in the coming months but risk are skewed to the upside because of the Brexit referendum.

Key Quotes:

“GBP has started the new year on a very weak note and while the postponement of a BoE rate hike in isolation implies upside risks to our EUR/GBP forecasts, we note that the BoE is already very dovishly priced for 2016. As such, we expect headwinds from relative rates to ease going forward and in a scenario with fewer global growth concerns, the relative rate channel could in fact support a lower EUR/GBP in the coming 3-6M.”

“However, we see little prospects of a strong GBP rally in the coming months due to the looming EU referendum. Indeed, a substantial Brexit risk premium is already priced into the FX option market, but GBP might still suffer due to rising uncertainty as the referendum moves closer.”

“In all, we look for EUR/GBP to be fairly trendless and very volatile in the coming months with the risks skewed towards further EUR/GBP upside going into a possible EU referendum in June. We are currently reviewing our EUR/GBP forecast which will be published in the next FX …read more

Source:: FX Street