- EUR/GBP has been moving higher, albeit slowly, over the past few months.
- Further upside can probably be expected, considering that the U.K. faces heightened uncertainty post year-end, after its trade deal deadline passes.
- The U.K. may be able to formalize a trade deal with the EU in time; however, this is unlikely to change GBP sentiment considerably.
- The service-led economy of the U.K. has recently been plunged back into another month-long national lockdown (to fight COVID-19).
- Meanwhile, EUR still appears undervalued (as implied by PPP modeling), with our 0.96 target still in sight. Provided inflation remains higher in the U.K., the fair value number for 2020 is also likely to have risen further.
For further details see:
EUR/GBP: Likely To Grind Higher