Analysts from Danske Bank forecast the EUR/GBP will reach 0.83 in a twelve-month horizon. They remain bullish on the pound and expect the United Kingdom economy to continue its recovery during the second half of 2021.
Key Quotes:
“We expect the UK recovery to continue in H2. The recovery is also supported by businesses getting used to the new EUUK trading relationship. The historical relationship between new cases and hospitalisations has weakened significantly due to the vaccines. We still expect the UK economy will outperform the euro area this year.”
“At its August meeting, the Bank of England (BoE) opened the door a little further in regards to a tightening of monetary policy due to evidence of increasing inflation, thus highlighting its hawkish stand. The BoE has also previously said it would slow the bond buying pace, a signal that QE may not be extended further (bond buying is set to expire by year-end). Eventually, the BoE is likely to tighten monetary policy earlier than the ECB.”
“As expected, EUR/GBP has moved down to 0.85 since our last update. We still expect EUR/GBP will trade lower in coming months, as we remain more upbeat on the UK economic outlook than the euro area. We also think a more hawkish Fed and BoE will support GBP. We target 0.83 in 12M.”
