GBP stays bullish medium term – Danske Bank

Senior Analyst at Danske Bank Mikael Milhoj sees the Sterling gathering traction in the next months.

Key Quotes

“GBP has started the week on weak note with EUR/GBP rising above 0.8860 among others driven by a weaker-than-expected UK service PMI, which unexpectedly declined from 54.2 in December to 53.0 in January”.

“We expect the BoE to take a wait-and-see approach at its MPC meeting on Thursday, and we see EUR/GBP risks mainly skewed to the upside this week given 1) market’s relative hawkish pricing of a 50% probability of a BoE rate hike already in May, 2) high non-commercial GBP positioning and 3) current ‘low’ Brexit risk premium”.

“Hence, a test of the technical resistance level at 0.8909 (17 Jan high) could be within reach this week. Strategically, we remain bullish GBP on a medium term horizon and we would consider selling EUR/GBP if the cross bounces above 0.8950”.