EUR / GBP has been volatile lately, but is trading near 0.85 after the Bank of England (BoE) started its rate hike cycle 15 basis points to 0.25%. The Danske Bank economists remain bullish on the pound, raising their 12-month target to 0.84.
“We still believe that the EUR / GBP will move slightly lower in 2022 as the ‘USD positive’ environment tends to benefit the GBP against the EUR as well.”
“We have raised our 12-month target to 0.84 (from 0.83) given the aggressive market pricing following the Bank of England decision. This, together with the renewed uncertainty of Brexit, can exert some upward pressure on the EUR / GBP in the short term or at least increase volatility “.
“A hit in global risk sentiment could hit the British pound. The pound would also be affected if the Bank of England maintains accommodative monetary policy for longer than expected. Stagflation may become more pronounced in the UK compared to the euro zone. Tensions between the EU and the UK remain a risk. “
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