GBP could see its momentum gathering traction – Danske Bank

Mikael Milhoj, Senior Analyst at Danske Bank, noted the recent strength from the Sterling and gave his prospects on the potential price action in the next months.

Key Quotes

“GBP rallied significantly and EUR/GBP is now trading below the highs seen before the flash crash on 7 October when the cross temporarily spiked above 0.94”.

“In some ways, the Trump victory has been seen as a positive for the UK and GBP and according to the news media, Trump has told UK PM Theresa May that he wants to rekindle the kind of relationship Margaret Thatcher and Ronald Reagan shared in the 1980s”.

“Trump has previously praised Brexit and indicated the UK would be at the front of the queue when it comes to trade deals. In addition, the EU’s chief Brexit negotiator also indicated a somewhat more peace-making tone towards the UK when saying that the EU will not be a pushover in talks on Britain’s withdrawal”.

“While it is too early to call the Trump win a clear game changer for GBP, we think GBP momentum could develop further in the near term. As the important resistance level of 1.2480 in GBP/USD has been cleared, technically there should be room for a test of 1.30. The market is very short GBP, according to IMM, suggesting substantial correction potential”.