Danske Bank economists still believe that the pound will strengthen in 2021 with higher rates in the short term, a rapid vaccination process in the UK and much less Brexit uncertainty. Hence, you see EUR / GBP moving towards 0.87 in 12 months.
Key statements:
“The greatest uncertainty of the year Bank of england is whether it will reduce the bank rate to negative territory. We are in the field that believes the Bank of England will keep it unchanged at + 0.1%, which means higher yields on short-term government debt are likely to support the British pound. “
“While the Brexit deal did not push the British pound up to the extent that we think it would, we continue to believe that the British pound will strengthen in 2021, driven by a higher short-term interest rate differential, a process faster COVID-19 vaccination rates and fewer Brexit uncertainties. “
“We raise our projections, now we forecast 0.89 in 1M, 0.88 in 3M and 0.87 in 6-12M“.
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