Brexit: It’s the final countdown – Danske Bank

Research Team at Danske Bank, suggests that it is finally time for the British to decide: Do they want to remain or leave the European Union?

Key Quotes

“Nothing is decided yet and it is not over until the fat lady sings, as we have said multiple times in recent weeks.

GBP is very much the epicentre of ‘Brexit’ risk and there is set to be a ‘knee-jerk’ reaction either way this week. Given our spot risk premium estimates we expect EUR/GBP to decline to a 0.7500-0.76500 range under a ‘remain’ vote. Under a ‘leave’ vote it is very difficult to say just how much intraday GPB weakness there will be, but we want to stress that fundamental models do not rule out EUR/GBP rising to 0.90.

More importantly, irrespective of the size of the initial reaction under a ‘Brexit’ we would expect the GBP to trade at much weaker levels for a prolonged period of time. In our base case of a ‘Bremain’ we forecast EUR/GBP at 0.76 in 1M, 0.76 in 3M, 0.74 in 6M and 0.75 in 12M.”