By FX Empire.com
EUR/GBP Weekly Fundamental Analysis March 5-9, 2012, Forecast
Rule: 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
Analysis and Recommendations
The EUR/GBP is trading at 0.8337. Last week, the EUR/GBP cross rate succeed a similar break higher as was the case for the EUR/USD cross rate. However, the trigger wasn’t the same. EUR/GBP was well bid from Monday. On Wednesday sterling was hit by a new selling wave after the publication of the Minutes of the previous BoE meeting. The voting pattern at the February meeting was 7-2 to raise the amount of asset purchases by ?50 billion. Two members voted in favor of an increase by ?75 billion. Markets apparently saw the combination of 2 voters in favor of more QE while no one voted to leave the amount of asset purchases unchanged as keeping the door open for an additional move of the BoE in the future. BoE’s Miles, one of the dissenters, defended its approach in detail in the press. Whatever the reason, EUR/GBP cleared the 0.8422 range top on Wednesday and the break accelerated on Thursday when the headline EUR/USD cross rate jumped higher on a better than expected German IFO release. EUR/GBP reached a new reaction high just north of the 0.8500 barrier on Friday. On Tuesday, EUR/GBP preceded EUR/USD in breaking the topside of the established consolidation pattern. The pair was also first to change course on Friday as EUR/USD still extended its rally at time before changing turning south again on Monday morning. As was the case for EUR/USD, it was not always clear to see the reason behind the rally of euro. However, we assume that technical considerations in a market that was short euro prevailed, as was the case for the headline EUR/USD cross rate.
Only Good News from the US:
Existing home sales US existing home sales picked up unexpectedly in January, but the previous figures were downwardly revised.
Initial jobless claims US initial jobless claims stayed unchanged in the week ending February the 18th, while the consensus was looking for an increase.
University of Michigan consumer confidence The final figure of Michigan consumer confidence for February showed a strong upward, revision from 72.5 to 75.3, while only a minor one was expected.
New home sales After increasing for four consecutive months, US new home sales dropped at the start of 2012.
Federal Reserve Chairman Bernanke testified before the Senate, this week, the markets found his comments a bit dovish and drew conclusions that any additional QA was off the table for the time being. Although the Chairman warned that the economy was recovering, he stated it was fragile and he was still worried about jobs. Gold soared on his comments.
News from the Eurozone
This week starts off with an agreement on the Greek bailout and approval from the EU, ECB and IMF. Greece passes a major hurdle and now needs to complete their agreement with the IIF.
There are worries about the CDS swaps triggering a credit event, at first, the initial ruling ruled that there would be no credit event, but it turns out that ruling was on a very small question concerning the ECB, it seems now that now that Greece has passed the new laws so they can force bondholders to accept the agreement, it will now trigger a credit event and CDS insurance will have to payout.
The ECB, liquidity operation, although successful, loans funds to over 800 banks, in excess of 500 billion euros. Markets are now worried about the consequences.
Spain reported that they will miss their budget deficit target this year, but still remain on track for 2013.
The EU approved the next tranche for Portugal.
The G20 meeting in Mexico ended without any results with non euro nations saying that the eurozone needs to pick up their game and show their money before any others would consider participating.
The EU Summit this past week went off quietly without much in the way of announcements.
Consumer confidence European Commission’s consumer confidence improved for a second straight month in February. Consumer confidence rose from -20.7 to -20.2, marginally weaker than expected (-20.1).
Industrial new orders Euro zone industrial new orders rebounded by 1.9% M/M in December, while only a moderate pick up was expected.
IFO business climate indicator The German IFO index rose for a fourth consecutive month in February. The indicator jumped from 108.3 to 109.6, while a more moderate increase was expected.
Manufacturing PMI Euro zone manufacturing PMI extended its rebound in February, rising for a third consecutive month, but at a slower pace. Services PMI After three consecutive increases, euro zone services PMI fell back in February, from 50.4 to 49.4, while a slight increase was expected.
In January, the euro zone unemployment rate rose unexpectedly. The unemployment rate jumped from an upwardly revised 10.6% (earlier reported as 10.4%) to 10.7%, while the consensus was looking for stabilization at 10.4%. Eurostat estimates that the number of people unemployed rose by 185 000 in the euro area in January, to a total level of 16.925 million. The highest unemployment rates were observed in the Spain (23.3%), Greece (19.9% in November), Ireland and Portugal (both 14.8%). The youth unemployment rate (under 25) was 21.6% in the euro zone. The euro zone unemployment rate is now at the highest level since October 1997 and is just 0.2% below its all time high, suggesting that a jump above the all-time highs is not excluded in the coming months.
News from the Far East
In Australia Prime Minister Gillard won her battle against ex Prime Minister Rudd, who is now retiring from public life.
China’s official purchasing managers’ index (PMI) rose to 51.0 from 50.5 in January.
China also signaled this week that they are considering offering assistance to the EU and the EFSF.
Japan’s unemployment rate inched up to 4.6 per cent in January from a revised 4.5 per cent in the previous month, the government said on Friday. The figure was roughly in line with economists’ forecasts.
The ministry also said January household spending fell by an inflation-adjusted 2.3 per cent year-on-year. The fall was bigger than a 0.8 per cent drop economists had expected.
Japan refrained from selling yen in the foreign-exchange market last month, according to the Finance Ministry.
The nation didn’t sell any of its currency from Jan. 30 to Feb. 27, the ministry’s month-end data posted on its website shows. The yen last week tumbled to an almost nine-month low against the dollar after the Bank of Japan on Feb. 14 unexpectedly added ?10 trillion to an asset-purchase program and set an inflation goal of 1 percent.
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 Events:
Only Major Events:
Please refer to the daily forecasts for all economic data releases for each day, with details and forecast.
|
Mar. 07 |
13:15 |
USD |
ADP Nonfarm Employment Change |
|
Mar. 08 |
12:00 |
GBP |
Interest Rate Decision |
|
12:45 |
EUR |
Interest Rate Decision | |
|
13:30 |
USD |
Initial Jobless Claims | |
|
13:30 |
EUR |
ECB President Draghi Speaks | |
|
Mar. 09 |
02:00 |
CNY |
Chinese CPI (YoY) |
|
13:30 |
USD |
Nonfarm Payrolls | |
|
13:30 |
USD |
Trade Balance | |
|
13:30 |
USD |
Unemployment Rate |
1st of the month global economic data releases actual v. forecast
|
AUD |
Building Approvals (MoM) |
0.9% |
2.1% |
-1.0% |
|
AUD |
Private New Capital Expenditure (QoQ) |
-0.3% |
3.9% |
14.6% |
|
INR |
Indian Trade Balance |
-14.8B |
-11.0B |
-12.7B |
|
CHF |
GDP (QoQ) |
0.1% |
-0.1% |
0.3% |
|
GBP |
Nationwide HPI (MoM) |
0.6% |
0.3% |
-0.3% |
|
CHF |
SVME PMI |
49.0 |
48.5 |
47.3 |
|
EUR |
French Manufacturing PMI |
50.0 |
50.2 |
50.2 |
|
EUR |
German Manufacturing PMI |
50.2 |
50.1 |
50.1 |
|
EUR |
Manufacturing PMI |
49.0 |
49.0 |
49.0 |
|
PLN |
Polish GDP (YoY) |
4.3% |
4.2% |
4.2% |
|
GBP |
Manufacturing PMI |
51.2 |
52.0 |
52.0 |
|
EUR |
CPI (YoY) |
2.7% |
2.6% |
2.6% |
|
EUR |
Unemployment Rate |
10.7% |
10.4% |
10.6% |
|
USD |
Core PCE Price Index (MoM) |
0.2% |
0.2% |
0.1% |
| Current Account |
-10.3B |
-9.6B |
-12.3B |
|
|
USD |
Personal Spending (MoM) |
0.2% |
0.4% |
0.0% |
|
USD |
Initial Jobless Claims |
351K |
353K |
353K |
|
USD |
Continuing Jobless Claims |
3402K |
3400K |
3404K |
|
USD |
ISM Manufacturing Index |
52.4 |
54.6 |
54.1 |
|
USD |
Fed Chairman Bernanke Testifies | |||
|
KRW |
South Korean CPI (YoY) |
3.1% |
3.5% |
3.4% |
|
JPY |
Unemployment Rate |
4.6% |
4.5% |
4.6% |
|
JPY |
Tokyo Core CPI (YoY) |
-0.3% |
-0.4% |
-0.4% |
Government Bond Auction Schedule
Mar 05 10:10 Norway Bond auction
Mar 06 10:10 Greece Auctions 6M T-bills
Mar 06 10:15 Austria Bond auction
Mar 06 10.30 UK Auctions 0.75% 2034 I/L Gilt
Mar 06 15:30 UK Details gilt auction on Mar 15
Mar 07 10:10 Sweden Nominal bond auction
Mar 07 10:30 Germany Eur 4.0bn Feb 2017 Bobl
Mar 07 10.30 UK Auctions new Sep 2017 conventional Gilt
Mar 08 16:00 US
Announces auctions of 3Y Notes on Mar 12, 10Y Notes on Mar
13 & 30Y Bonds on Mar 14
Originally posted here
