EUR/GBP looks to 0.90 in 6-month – Danske Bank

In view of Kristoffer Lomholt, the European cross is seen grinding lower to the 0.90 area in the medium term.

Key Quotes

“In the majors, EUR/GBP once again inched higher as the BoE continued its asset purchase operations. Yesterday, it reached its buying target after supply fell short on Tuesday”.

“We still expect GBP to remain under pressure in the coming months, targeting EUR/GBP at 0.90 in 6M. However, following the past six days of consecutive gains, EUR/GBP now looks increasingly overbought according to short-term technical indicators, such as RSI”.

“The BoE has completed its asset purchase operations this week and the bank will resume buying government bonds on Monday. This could ease some of the downward pressure on UK interest rates and GBP in the coming days”.

“Our bearish view on GBP is not just a story of monetary policy easing in the UK, but more importantly, a macroeconomic story about the adjustment of a large current account imbalance. Hence, we would look for opportunities to buy EUR/GBP on corrections lower”.