EUR/GBP seen within 0.82-0.8650 post-elections – Danske Bank

Pernille Henneberg, Senior Analyst at Danske Bank, expects the European cross to gravitate within 0.82 and the mid-0.8600s following the elections in the UK in early June.

Key Quotes

“We stress that in our view the snap UK election on 8 June is not likely to create any additional uncertainty for the GBP. That said, it has implications for the Brexit outcome and the overall risk assessment of sterling”.

“In our main scenario, we expect the Conservatives and Theresa May to consolidate their majority. In this scenario, the UK is still set to leave the single market and the custom union but the risk of a 'no deal Brexit' is lower”.

“We expect valuation and positioning to offset GBP weakness driven by possible election risk premiums ahead of 8 June and target EUR/GBP at 0.84 in 1M. Further out, we expect EUR/GBP to settle in the 0.82-0.8650 range post the election targeting the cross at 0.84 in 3M and 0.83 in 6-12M, as lower Brexit tail risks justify a less undervalued GBP in the medium term”.