EUR/GBP: Mind The Divergence – Where To Target? – SocGen

The “Brexit currency pair” has periods of high volatility and times of stability. The growing divergence could provide an opportunity for gains in Q3:

Here is their view, courtesy of eFXnews:

Societe Generale FX Strategy Research makes the case for further EUR/GBP gains targeting 0.90 in Q3. 

“The UK economy has weathered the 12 months since the vote to leave the EU better than feared, though the 1Q gain in GDP was, at 0.1% qoq, the slowest in the EU and the uncertainty emanating from the 8 June election result won’t help going forwards.

The UK has the same annual growth rate as the US (2%) and is marginally above the euro area’s 1.9%.  From here, we think there will be divergence, with the UK falling to the bottom of the pile – 1.6% growth in 2017, compared with 2.1% in the US and 1.8% in the euro area; and 0.9% in 2018, compared with 2.2% in the US and 1.5% in the euro area. Some of that is ‘in the price’, but not all,” SocGen argues.

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