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EUR/GBP remains a sell on rallies – Danske Bank

FXStreet (Edinburgh) - Senior Analyst at Danske Bank Signe-Roed Frederiksen sees EUR/GBP grinding lower in the medium term.

Key Quotes

“Although CPI inflation continues to be low, we still expect inflation to pick up early next year when the base effects from the drop in commodity prices begin to fall out of the consumer price index”.

“In addition, we expect the UK economy to continue to grow at a decent pace in the coming quarters primarily driven by consumption”.

“This should continue to support an already strong labour market where wage growth has picked up substantially over the past months”.

“We still have February 2016 as our base case for the first Bank of England hike and consequently we expect relative rates to be a supportive factor for the GBP in the coming months (currently markets price in a full hike in January 2017)”.

“Adding to this the GBP already seems significantly undervalued according to our short-term financial models – even at current fundamentals”.

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