EUR/GBP: Brexit negotiations will become the centre of attention weaking the pound – Danske Bank

The UK negotiations with the EU will again draw attention and weigh negatively on the GBP, which leads economists at Danske Bank to forecast EUR/GBP at 0.90 in 1-6 months. 

Key quotes

“We expect the BoE to keep policy rates unchanged. That said, deputy governor, Ben Broadbent has not completely ruled out cutting into negative territory. The new governor Bailey has hinted that the BoE may increase its QE program, in line with our expectations.” 

“We expect GBP to weaken driven by further Brexit tensions, especially ahead of the decisions on a possible extension of the transition period, financial services, and fishing before 1 July. We probably need to get close to the year-end deadline before a trade deal is reached.” 

“We see EUR/GBP at 0.90 over 1-6M, followed by a move towards 0.86 on a trade deal in 12M.”