EUR/GBP: Today’s events not a game changer - Danske Bank

Analysts from Danske Bank still target EUR/GBP at 0.91 in three months and at 0.92 in six months. They see today’s Bank of England statement and the High Court ruling on Brexit not a game changer for GBP. 

Key Quotes: 

“Over the medium term, we do not see today’s events as a major game changer for GBP. First of all, the market did not price any further rate cuts from the BoE ahead of the meeting. Hence, the BoE’s shift in its stance actually just reflects the market’s pricing. “

“Moreover, we would like to stress that, although we previously expected additional BoE easing in the form of a 15bp rate cut in February, our call for a weaker GBP is a fundamental story.”

“Hence, we still think that the combination of significant economic imbalances (large current account deficit and a negative net international investment position) and Brexit uncertainties justifies a significant undervaluation of the GBP. In our view, it is too early to judge whether today’s High Court ruling will drastically change the prospect of Brexit. We still target EUR/GBP at 0.91 in 3M and 0.92 in 6M.”