Further volatility expected around GBP – Danske Bank

Aila Mihr, Analyst at Danske Bank, expects volatility around the Sterling to pick up in the next months.

Key Quotes

“GBP took a punch during yesterday’s session in what seems to be have driven by stops triggered initially at 1.2475-80 in GBP/USD. Subsequently, stops were hit as EUR/GBP broke above 0.8600”.

“GBP recovered most of its losses last night as GBP/USD saw renewed support from a more broad-based USD selling. We expect GBP crosses to remain volatile and continue to react strongly to Brexit news and we expect GBP to face renewed pressure in coming months as the UK moves towards triggering Article 50 and exiting the EU”.

“We target EUR/GBP at 0.88 in 3M but stress that risks are skewed very much to the upside relative to our forecast, and we generally recommend maintaining high hedge ratios on GBP exposure”.