- The EUR / GBP rally from 0.8700 consolidates to six-week highs above 0.8900.
- The pound underperforms on the tensions linked to Brexit and the consequences of COVID-19.
- The pound will continue to weaken until the Brexit situation clears up – Danske Bank.
EUR / GBP is on track to close its best week in two months, gathering almost 2.5%, the pound being struck by fears of the consequences of COVID-19 and the risks of Brexit. The pair jumped levels just above 0.8700, to break previous peaks at 0.8860 and sit comfortably at six-week highs above 0.8900
Brexit tensions drop pound
The pound was the worst performing currency in the G10 this week. With the UK facing the highest COVID-19 death rate in Europe, the GBP was put under pressure due to the lack of guidelines on country plans to break the deadlock.
In addition, weak progress in Brexit negotiations added negative pressure to the pound today. The differences between the negotiators and Britain’s refusal to extend the transition period heighten market concerns about the possibility of a Brexit without an agreement, which has intensified the negative pressure on the pound.
EUR / GBP: direction 0.90 in one month – Danske Bank
The FX Analysis The Danske Bank team expects the pound to further weaken on Brexit tensions, “We see the EUR / GBP at 0.90 in 1M, 0.90 in 3M and 6M (unchanged ), followed by a move towards 0.86 on a 12M trade agreement. “