Following the Bank of England decision to keep monetary policy unchanged on Thursday, analysts at Danske Bank see upside risks for the EUR/GBP pair in the short-term but they still expect it to move lower later, with a 0.83 target in twelve months. 

Key Quotes: 

“As expected, the EUR/GBP moved higher on announcement now trading at 0.856 vs. 0.847 before the announcement. We are still of the view that the move higher in EUR/GBP will be short-lived but near-term there are upside risks given the current market pricing of Bank of England.”

“We still expect rate hikes from the Bank of England, while we expect the ECB to stay patient despite recent increases in rate hike expectations.”

“We still believe the environment is more supportive for GBP than EUR, as GBP usually strengthens in an environment where USD does. That said, the potential for a stronger GBP is lower than for USD. We still target EUR/GBP in 0.83 12M.”