THE POUND-EURO REACH 1.33 – DANSKE BANK

The G10 MEVA analytical model, developed by Danske, continues to show the potential for the EUR / SEK and EUR / GBP pairs to decline, despite Brexit,” said Kristin Taxen, chief analyst of the bank.
 
MEVA uses changes in prices for imports and exports for each country, as well as a difference in labor productivity, in order to forecast the dynamics of the exchange rate for the next 1-3 years.
 
Sterling remained unchanged against the euro in 2018, being close to 1.13.
 
In addition, the pound weakened against the dollar, and the pound-dollar pair today is 3.5% higher than in January, with an increase of 5.6%.
 
“For Britain, the future of relations with the EU and the ability to avoid tough Brexit is important,” notes Morten Helt, an analyst at Danske Bank.
 
“The agreement on the transition period will help to avoid such a scenario,” he adds.
 
If the agreement is signed, the pound will begin to approach its “fair value”, which is EUR / GBP 0.75, and for the pound-euro pair – 1.33.
 
After adjusting for the expected effect of Brexit, the fair value of the pound-euro pair was 1.22, which is 6.8% higher than 1.1294, which was observed on Wednesday.
 
Against the dollar, the pound should reach 1.70, which is 22% higher than today’s 1.3980.