EUR/GBP: Liquidity concerns to weigh on GBP in the near-term – Danske Bank
|Analysts at Danske Bank forecast the EUR/GBP cross at 0.86 in twelve months, but they expect fragile risk appetite including, specific concerns regarding the United Kingdom to weigh on GBP in the near term.
Key Quotes:
“Given the sizeable expected increase in the twin-deficit, we see a level shift having taken place in EUR/GBP, with the cross to trade in a higher range. In the near-term, we expect high volatility in the cross amid crucial BoE meetings and budget presentation.”
“We forecast EUR/GBP at 0.89 in 3M as we expect to see fragile risk appetite, where liquidity concerns weigh on GBP. Further out, we remain cautiously optimistic that the cross will head lower as a global growth slowdown and the relative appeal of UK assets to investors are a positive for GBP relative to EUR.”
“The key risk to see EUR/GBP moving above 0.90 is a sharp selloff in risk where capital inflows fade and liquidity becomes scarce. This risk has only increased with the outlook of further unfunded fiscal easing. Other risks are the outlook for the UK economy deteriorating sharply compared to the Euro Area and renewed escalations in EU-UK tensions.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.