EUR/USD: the euro is also vulnerable to a hard Brexit (Merrill Lynch)

According to Merrill Lynch, the euro is just as, if not more, vulnerable than the British pound to a hard Brexit.

ML notes that a hard Brexit would also be a shock for the eurozone economy at a time when momentum is already slowing. The bank says this would be a disadvantage not only for the British pound, but also for the EUR/USD and EUR/JPY.

"If a hard Brexit triggers a recession in the weaker parts of the eurozone, as in Italy, the economy could be more affected than the markets are currently forecasting." Adding that "if the markets question the sustainability of the euro area, as in the 2012 crisis, the UK could again look like a refuge and its decision to leave the EU could be seen in a more positive light" as an argument for being less bearish regarding the pound than the euro.

Despite this, the firm still think that the GBP/USD could fall to 1.10 in the event of a Brexit without agreement, and that the pair could rise to 1.50 if the Brexit is stopped.