EUR/GBP could retreat further on Brexit progress – Danske Bank

Chief Analyst at Danske Bank Christin Tuxen noted the European cross could extend the decline in light of auspicious talks on the Brexit front.

Key Quotes

“Brexit optimism improved further yesterday and EUR/GBP continued lower amid news reports speculating that the Brexit deal could be settled on Monday. As such, the bearish break below the 200-day moving average last Friday implies that EUR/GBP could see continued downside pressure from a technical point of view in the short term”.

“However, at the end of the day, the near-term outlook for GBP will be driven by Brexit negotiations. Also, as the ‘end game’ draws closer, the more digital the event becomes. We expect EUR/GBP to break lower once a no-deal scenario can be ruled out. However, while the timing is not impossible, we are still sceptical that the EU and UK will reach a deal at the EU Summit on 18 October. Hence, we see risk is tilted towards a round of negative news and thus a reversal of the latest Brexit optimism”.