EUR/GBP to race higher towards 0.88 if Article 16 is triggered – Nordea

Brexit-risks are back in the limelight as Boris Johnson considers invoking article 16 in the Northern Irish protocol. In the view of economists at Nordea, EUR/GBP is probably headed towards higher levels, if Brexit risks are reintroduced.

Triggering of Article 16 will likely lead the BoE towards fewer hikes than priced 

“We judge that EUR/GBP is headed back towards 0.88 should the Brexit-uncertainty be re-introduced and it will likely also at least partly wreak havoc with Bank of Englands hiking plans.”

“We continue to forecast two hikes (2x 25 bps) from Bank of England during 2022, and we expect them to refrain from hiking in December should the triggering of Article 16 happen before then, which we consider to be the base case now.”