Trade ideas: EUR vs GBP - Scotiabank

Analysts at Scotiabank explained that they think the outlook points to medium-term outperformance for GBP vs. EUR, despite near-term concerns surrounding Brexit and the triggering of Article 50 slated for March.

Key Quotes:

"Fundamentals, technicals, positioning, and sentiment are all aligned for a decline in EUR/GBP.

We are recommending a short EUR/GBP trade idea for 2017, targeting a push to 0.80 and potentially even 0.75. Our recommendation is driven by considerations of political risk as we look to the 2017 calendar with various elections across key EU countries including the Netherlands, France, and Germany.

Disruption of the status quo prevailed in 2016, delivering both Brexit and a Trump presidency and populist anti-EU movements are likely to dominate the narrative throughout 2017. Ongoing banking sector issues in Italy present an added dimension in the aftermath of the referendum.

The political theme has implications for relative central bank policy and sentiment that will likely deliver a decisive reversal of the EUR/GBP rally from November 2015 to October 2016."