By FXEmpire.com
Introduction: The cross tends to move in ranges, with relatively clear barriers. The narrower ranges made it somewhat harder, but it seems to return to wider ranges. The GBP is does not seem to move in response to the EUR as directly currently. The UK austerity program vs. The EU debt crisis seems to have them moving in opposing distances. They are developing new trading personalities and there is a good deal of profit to be made trading this pair. They can be volatile.
- The interest rate differential between the European Bank(ECB) and the Bank of England(BoE)
- European and UK economic data
- Growth differentials between the Euro zone and UK
Weekly Analysis and Recommendations
The EUR/GBP ended the week at 0.8149 after the UK GFK consumer confidence was reported unchanged at -31, slightly weaker than expected. The impact on sterling trading was limited. Later today, there are no important eco data on the calendar in the UK. So, the focus will be on global issues and on euro side of the story. At least for now, we don’t see any market panic on the S&P downgrade of Spain. However, we cannot imagine that it will help the euro.
|
Date |
Open |
High |
Change % |
||
|
Apr 27, 2012 |
0.8149 |
0.8154 |
0.8169 |
0.8134 |
-0.06% |
|
Apr 26, 2012 |
0.8154 |
0.8178 |
0.8186 |
0.8148 |
-0.29% |
|
Apr 25, 2012 |
0.8178 |
0.8174 |
0.8222 |
0.8165 |
0.05% |
|
Apr 24, 2012 |
0.8174 |
0.8159 |
0.8187 |
0.8144 |
0.18% |
|
Apr 23, 2012 |
0.8159 |
0.8188 |
0.8190 |
0.8149 |
-0.35% |
So, EUR/GBP might remain under pressure. Last week, the Minutes of the April BoE Meeting pushed EUR/GBP out of the previous range. Several other key support levels are lining up like 0.8143, the August 2010 low and 0.8068 the June 2010 low. EUR/GBP came already close to the first support earlier this week. It could take time for EUR/GBP to break clearly below these high profile levels. Nevertheless, we are encouraged by the recent good performance of sterling and thus keep our EUR/GBP short position.
This morning the BOJ raised the amount of government purchases by 10 Trillion yen and also indicated that it will buy longer-term government bonds. They also intends to buy other, riskier assets
With a disappointing GDP from the US showing growth had slowed to 2.2% from an estimated 2.5%, the euro has been able to gain some strength.
The GDP report joined this month’s list of weaker economic data with the U.S. economy forecast to grow at a slower pace from 3.0% in the fourth quarter of 2011 to 2.6% in Q1 2012. It would not be surprising to see the pressure mounting on the U.S. dollar on signs of U.S. economic slowdown and elevated QE3 odds.
On Thursday, changes in the EUR/GBP cross rate were very limited. Sterling remained in the drivers’ seat even as the UK data were mixed. EUR/GBP followed again more or less the price pattern of the EUR/USD headline pair. The euro tried a cautious attempt move higher at start of trading in Europe.
However, after two days of risk-on sentiment, investors turned again more cautious. At the current juncture, this is still a slightly negative for the euro. The UK BBA loans for house purchases were weak, but had no impact on trading. The euro and the equity markets lost further ground after much weaker than expected EC confidence indicators. The UK distributive trades were mixed.
In an interview, BOE’s Weale said that the argument from QE was strong now than if the economy had shown growth. However, these headlines had only a limited impact on EUR/GBP trading. On the contrary, the pressure in the EUR/GBP cross rate remained to the downside. After the close of the US markets, S&P downgrade the credit rating of Spain by two notches to BBB+. EUR/GBP fell to the mid 81 area. So, the recent lows are again within reach.
Major Economic Events for the past week actual v. forecast
|
Core Retail Sales (MoM) |
0.5% |
1.0% |
-0.8% |
|
|
USD |
New Home Sales |
328K |
320K |
353K |
|
GBP |
GDP (QoQ) |
-0.2% |
0.1% |
-0.3% |
|
GBP |
GDP (YoY) |
0.0% |
0.3% |
0.5% |
|
USD |
Core Durable Goods Orders (MoM) |
-1.1% |
0.5% |
1.9% |
|
USD |
Interest Rate Decision |
0.25% |
0.25% |
0.25% |
|
NZD |
Interest Rate Decision |
2.50% |
2.50% |
2.50% |
|
USD |
Initial Jobless Claims |
388K |
375K |
389K |
|
USD |
GDP (QoQ) |
2.2% |
2.5% |
3.0% |
Historical:
Highest: 1.2336 EUR on 29 Jun 2010.
Average: 1.1548 EUR over this period.
Lowest: 1.0686 EUR on 13 Oct 2009
Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD
|
Tue May 1 |
4:30am |
GBP |
Manufacturing PMI |
51.4 |
52.1 |
|
10:00am |
USD |
ISM Manufacturing PMI |
53.0 |
53.4 |
|
|
Wed May 2 |
4:30am |
GBP |
Construction PMI |
54.2 |
56.7 |
|
8:15am |
USD |
ADP Non-Farm Employment Change |
179K |
209K |
|
|
Thu May 3 |
4:30am |
GBP |
Services PMI |
54.6 |
55.3 |
|
7:45am |
EUR |
Minimum Bid Rate |
1.00% |
1.00% |
|
|
8:30am |
EUR |
ECB Press Conference |
|||
|
8:30am |
USD |
Unemployment Claims |
382K |
388K |
|
|
10:00am |
USD |
ISM Non-Manufacturing PMI |
55.5 |
56.0 |
|
|
Fri May 4 |
8:30am |
USD |
Non-Farm Employment Change |
176K |
120K |
|
8:30am |
USD |
Unemployment Rate |
8.2% |
8.2% |
Upcoming Government Bond Auctions
Date Time Country
May 01 09:30 UK
May 02 09:10 Sweden
May 02 09:30 Portugal
May 02 13:00 US
May 03 08:30 Spain
May 03 08:50 France
May 03 09:10 Sweden
May 03 09:30 UK
May 08 09:15 Austria
May 08 09:30 Belgium
May 08 14:30 UK
May 08 15:30 Italy
May 08 17:00 US
May 09 09:10 Sweden
May 09 09:30 Germany
May 09 09:30 Swiss
May 09 09:30 UK
May 09 14:30 Sweden
May 09 15:30 Italy
May 09 17:00 US
May 10 15:00 US
May 10 17:00 US
May 11 09:10 Italy BOT auction
May 11 10:00 Belgium
Originally posted here
