EUR/GBP expected to remain above 0.90 in the near term – Danske Bank

Chief Analyst Allan von Mehren at Danske Bank sees the European cross keeping the 0.90 handle and above for the time being.

Key Quotes

“EUR/GBP edged lower yesterday after UK labour market figures showed the unemployment rate falling further to 4.4% in June and as average weekly earnings accelerated”.

“The fall in unemployment indicates that excess capacity has fallen in the UK and if this translates into rising wage growth it could put pressure on the BoE to tighten policy. However, real wage growth is still negative and we think the underlying inflation pressure will stay muted, as we see limited room for significantly higher wage growth when GDP growth is slowing”.

“We still expect the BoE to remain on hold until 2019 and not raise interest rates as Brexit uncertainty remains unusually high which should keep EUR/GBP above 0.90 near term”.