EUR/GBP: Year-end target remains at 0.84 after BoE and ECB – Danske Bank
07.02.2022, 16:11

EUR/GBP: Year-end target remains at 0.84 after BoE and ECB – Danske Bank

Analysts at Danske Bank still view that the level of around 0.83 in the EUR/GBP cross was the bottom as relative rates now seem more supportive for euro than the British pound. They continue to forecast EUR/GBP at 0.84 in twelve months. 

Key Quotes: 

“We now expect the BoE to deliver four additional 25bp rate hikes this year (March, May, August and November) versus two additional hikes previously. Our new BoE call remains slightly less aggressive than markets pricing, where five rate hikes are priced in.”

“We continue to believe that risk is skewed towards more rate hikes (and also a probability of a 50bp rate hike). BoE is now likely to announce some details on “active QT” in connection with the May meeting. Initially, EUR/GBP fell slightly below 0.83 on the hawkish signal but EUR/GBP is now trading closer to 0.85 supported by the ECB.”

“We are still of the view that the level of around 0.83 was the bottom in the cross, as relative rates now seem more supportive for EUR than GBP, as BoE rate hikes are already priced in and the ECB is turning more hawkish.”

“Overall, we still see the 2022 investment environment as USD-positive, which is usually benefitting GBP relative to EUR, which we believe will dominate slightly. Hence, we continue targeting EUR/GBP at 0.84 in 12M.”

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