EUR/GBP Weekly Fundamental Analysis May 28 – June 1, 2012, Forecast

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 close to the low at 0.7990. With the recent negative outlook moving from the EU to the UK, and negative statements on the UK economy from the IMF and the OECD, investors began to shy away from the pound. The IMF recently stated that the BoE should take a more active role in assisting the economic recovery suggesting increased monetary easing and interest rate reductions.

The EU remained in turmoil as investors moved away from all assets connected to the EU. European markets will pose two main forms of risk to global markets next week. One will be an Irish referendum on the European Fiscal Stability Treaty or the EU fiscal compact on Thursday. Ireland is the only country to hold such a vote within the 25 European nations that signed on to the fiscal pact, as Irish law requires such a referendum to be held on matters affecting sovereignty. The concern overhanging voters is that Ireland may be cut off from international financial aid if it rejects the treaty, and that is why there is a modest balance of opinion in recent polls that is in favor of a yes vote.

That said, Ireland has two precedents for rejecting EU treaties (like the Lisbon Treaty in 2008), and another would be a further setback to German-led austerity efforts. A ‘no’ vote, however, would not derail the fiscal compact because only twelve countries are needed to ratify it. The second main form of European risk comes through key updates on the German economy. Germany’s economy averted recession by expanding 0.5% q/q in Q1 following a small 0.2% decline in Q4. Retail sales are expected to come in flat for the April print, the unemployment rate is expected to hold around a post reunification low of 6.8%, and CPI is expected to be soft enough to justify a further ECB rate cut.

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.

Major Economic Events for the week of May 21-25 actual v. forecast for Euro, GPB, and the Franc

Currency	Actual	Forecast	Previous
GBP	CPI y/y	3.0%	3.1%	3.5%
GBP	Public Sector Net Borrowing	-18.8B	-8.5B	14.6B
GBP	MPC Meeting Minutes	0-0-9	0-0-9	0-0-9
GBP	Retail Sales m/m	-2.3%	-0.8%	2.0%
EUR	German Flash Manufacturing PMI	45.0	47.1	46.2
EUR	German Ifo Business Climate	106.9	109.4	109.9
GBP	Revised GDP q/q	-0.3%	-0.2%	-0.2%

Historical:

Highest: 1.2336 EUR on 29 Jun 2010.

Average: 1.1548 EUR over this period.

Lowest: 0.7950 EUR on 16 May 2012

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD

Date	Time	Currency	Previous
May 28	28th-31st	GBP	Nationwide HPI m/m	-0.2%
May 29	All Day	EUR	German Prelim CPI m/m	0.2%
	14:00	USD	CB Consumer Confidence	69.2
May 30	7:00	CHF	KOF Economic Barometer	0.40
	8:00	EUR	M3 Money Supply y/y	3.2%
	8:30	GBP	Net Lending to Individuals m/m	1.4B
	14:00	USD	Pending Home Sales m/m	4.1%
	23:01	GBP	GfK Consumer Confidence	-31
May 31	5:45	CHF	GDP q/q	0.1%
	31st-3rd	EUR	German Retail Sales m/m	0.8%
	6:45	EUR	French Consumer Spending	-2.9%
	7:55	EUR	German Unemployment	19K
	9:00	EUR	CPI Flash Est?mate y/y	2.6%
	12:15	USD	ADP Non-Farm Employment	119K
	12:30	USD	Prelim GDP q/q	2.2%
	12:30	USD	Unemployment Claims	370K
	13:45	USD	Chicago PMI	56.2
Jun 1	TBD	GBP	Halifax HPI m/m
	7:15	CHF	Retail Sales y/y	4.2%
	7:30	CHF	SVME PMI	46.9
	7:45	EUR	Italian Manufacturing PMI	43.8
	8:30	GBP	Manufacturing PMI	50.5
	9:00	EUR	Unemployment Rate	10.9%
	12:30	USD	Non-Farm Employment Change	115K
	12:30	USD	Unemployment Rate	8.1%
	12:30	USD	Core PCE Price Index m/m	0.0%
	12:30	USD	Personal Spending m/m	0.2%
	12:30	USD	ISM Manufacturing PMI	0.3%
	14:00	USD	S&P/CS Composite-20 HPI y/y	54.8

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Originally posted here