GBP: a hint of recovery, but for how long?
The EUR/GBP has fallen significantly since Monday as investors became anxious about how Deutsche Bank manages to unravel from its mounting problems. However, the pound’s advances are believed to be limited and the currency could easily crash from its peaks unless supportive data is published this Friday. Alternatively, if we don’t receive any signs of British economic recovery, the GBP may shoot again from its weekly highs.
The main stakeholders favor the first scenario which stands for the pound’s depreciation. Danske – the largest bank in Denmark, is long EUR/GBP from 0,8374, with a target at 0,9000 and stop at 0,8100. Its decision could be explained by various reasons. Danske believes that GBP will continue to depreciate with BoE’s monetary easing and considerable imbalances in the UK economy. It points out at the forecasts of the significant current deficit of approximately 6,4% of 2015 GDP. On top of this, Bank of England in its latest announcement made it clear that it is going to cut rates again this year, if its forecasts for growth are confirmed by the data. In addition, there is uncertainty about further EU-UK relationship is hovering in the air. The British government has yet not triggered the withdrawal process, striving to somehow prepare the vulnerable economy for the turbulent consequences.
Société générale also remains bearish of GBP and decides to open long position on EUR/GBP from 0,8620 with a target at 1,0000. According to the bank’s analysts, the EUR/USD may rise by 5 – 10% from its current position. There is a great potential for an upward movement, since there was a long period of consolidation and sideways trading.
CITI, unlike its colleagues, tends to support the second scenario. Recently, it has opened a short position on EUR/GBP from 0,8622, with a target at 0,8333 and a stop at 0,8750. CITI’s analysts noticed an evening star pattern on the technical EUR/GBP chart.