The British Pound rose to a 3-month high against the US Dollar on Tuesday following stellar jobs data from the UK that shows a fall in unemployment in the first quarter of 2021.
On the EUR/GBP pair, the price continues to trade around the 0.8595 price support, as the Euro continues to struggle to shove the weight of the Pound off its back. Danske bank remains bullish on the Pound as the Scottish National Party (SNP) could not secure an absolute majority in the Scottish Parliament election. The SNP’s failure means the prospects of another independence referendum is off the table for now, preserving the Pound’s strength.
Why is Danske Bank projecting a 0.83 price mark for the EUR/GBP with a 12-month outlook?
The bank says that Brexit has taken a back seat though the Northern Ireland protocol’s implementation remains a fundamental influence. The bank also feels that the Bank of England’s bond-buying program may not extend beyond the end of 2021, allowing for the BoE to commence monetary policy tightening well before the ECB. Furthermore, the UK’s handling of the coronavirus vaccination has been way better than that of the EU. Prospects for earlier economic recovery and growth favour the UK.
The bank expects these factors to push the EUR/GBP lower to 0.83 within 12 months, as per the bank’s outlook.
Technical Outlook for EUR/GBP
The price continues to trade around the 0.85952 support. If this price level gives way, we can expect the 0.85372 support to come into play. Below this level, 0.84883 becomes an additional target, as price inches its way towards Danske Bank’s target.
On the other hand, a bounce on the 0.85952 support allows the pair to assume a corrective advance towards the 0.8650 resistance initially, with 0.86811 and 0.87215 price levels forming additional barriers to the north.