EUR/GBP Fundamental Analysis May 25, 2012, Forecast

Analysis and Recommendations:

The EUR/GBP remained close to the opening, trading at 0.8014 after opening at 0.8018 and reaching a high of 0.8026. The drama in the Eurozone continues to weigh on markets, with today’s press reports featuring prominent former ECB board member Lorenzo Binhi Smaghi discussing a “war game”- style simulation of a Greek withdrawal from the common currency. Binhi Smaghi said that “leaving is difficult” and concluded from the simulation/exercise that leaving the euro “is not the answer to their (Greece’s) problems.” We agree, however markets were not heartened as his mere comment provided a further sign that serious people are contemplating at least the possibility of a Greek exit from the Eurozone.

The negative eco data and the disappointing GDP and the revision of the previous GDP weakened the sterling, which offset the poor euro PMI numbers. Germany had a day of negative eco data. But the euro was able to move upwards against sterling today, as the weakness exhibited since the IMF warned on the outlook for the UK economy, the pound has not been able to recover. UK GDP was revised lower by one tenth of a percentage point to -0.3% q/q (the initial reading was -0.2% q/q). The revision was principally attributable to weaker construction data than was originally registered in the Q1 report

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Economic Data for May 24, 2012 actual v. forecast

Date	Time	Currency	Event	Actual	Forecast	Previous
May 24	03:30	CNY	Chinese HSBC Mfg PMI	48.70	49.30
07:00	EUR	German GDP (QoQ)	0.5%	0.5%	0.5%
07:00	EUR	German GDP (YoY)	1.7%	1.7%	1.7%
07:58	EUR	French Manufacturing PMI	44.4	47.0	46.9
08:28	EUR	German Manufacturing PMI	45.0	47.0	46.2
09:00	EUR	German Ifo Business Climate	106.9	109.4	109.9
09:00	EUR	Manufacturing PMI	45.0	46.1	45.9
09:00	EUR	German Current Assessment	113.3	117.4	117.5
09:00	EUR	German Business Expectations	100.9	102.0	102.7
09:30	GBP	BBA Mortgage Approvals	32.4K	32.3K	31.9K
09:30	GBP	Business Investment (QoQ)	3.6%	3.2%	-3.3%
09:30	GBP	GDP (QoQ)	-0.3%	-0.2%	-0.2%
09:30	GBP	GDP (YoY)	-0.1%	0.0%	0.0%
13:30	USD	Core Durable Goods Orders	-0.6%	0.9%	-0.8%
13:30	USD	Durable Goods Orders (MoM)	0.2%	0.5%	-3.7%
13:30	USD	Initial Jobless Claims	370K	370K	372K
13:30	USD	Continuing Jobless Claims	3260K	3250K	3289K