Notably, EUR/USD has started to close the valuation gap, which our G10 MEVA model has pointed to some time, but upside potential in the cross remains intact.
GBP remains substantially undervalued according to the model, but we stress that a 'Brexit-corrected' MEVA estimate for EUR/GBP is likely to be above 0.80 as the UK's terms of trades are set to deteriorate markedly.
While MEVA remains a key anchor for the 12-36M horizon, we note that misalignments have been allowed to persist for longer than usual with the half-life of the model having risen slightly since its introduction.
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