EUR/GBP Fundamental Analysis Feb 2, 2012, Forecast

Economic Events: (GMT)

07:00     CHF        Trade Balance                                                                 2.85B                     2.95B

The Trade Balance measures the difference in value between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported.

A higher than expected reading should be taken as positive/bullish for the CHF, while a lower than expected reading should be taken as negative/bearish for the CHF.

09:30     GBP       Construction PMI                                                           52.9                        53.2

The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager’s Index (PMI) measures the activity level of purchasing managers in the construction industry. A reading above 50 indicates expansion in the construction industry; a reading below indicates contraction. It gives an indication about the health of the construction section in the UK. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. 

A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP                            

10:00    EUR       PPI (MoM)                                                                         -0.1%                     0.2%

The Producer Price Index (PPI) measures the change in the price of goods sold by manufacturers. It is a leading indicator of consumer price inflation, which accounts for the majority of overall inflation.

A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

EUR/GBP Fundamental Analysis Feb 2, 2012, Forecast

Analysis and Recommendations:

The pair EUR/GBP is currently trading at .8320 after dropping to a low of 0.8282

 In the UK, the Sterling strengthened  after data showed that the manufacturing sector in the U.K. expanded at the fastest pace in eight months in January, as output grew at the fastest rate in 10 months and new orders rose.

Housing prices and sales continued to drop. Which is not unexpected but still below forecast, which was still pretty negative.

Analysts from Oxford Economics, at the Institute for Fiscal Studies (IFS) briefing, have predicted that the UK economy will shrink in the current quarter. That would put Britain back into recession. Oxford Economics also warned that that eurozone crisis is casting a dark shadow over the global economy

The IFS is arguing that George Osborne should consider some form of fiscal stimulus in next month’s budget. The IFS said there was a “strong case” for Mr Osborne to forego medium-term tax or spending giveaways in his March Budget – though it said there might be scope for tax cuts equivalent to 2p off the main rate of income tax in future years if the economy develops favourably.

The European manufacturing PMI reports all surprised today coming in above forecast. German also came in above forecast.

There is still no agreement in Greece and now the new plan offers creditors incentives based on improved GDP for Greece.

An aide said: “The prime minister is meeting troika representatives on Friday and wants to ram home the message of how urgent things are following our discussions in Brussels…..This is not going to be an easy week.”

Time is short. Athens faces €14.5bn in bond repayments on March 20. The goal is to hammer out a deal for a second package of rescue funds worth €130bn, and the private sector bond swap deal that will wipe €100bn from Greece’s debt, ready for at a Eurogroup meeting of finance ministers on Monday.

The euro will stay close to the 1.30 range unless the US unemployment data on Thursday is disasterous.

Today’s Economic Reports Results

GBP       Nationwide HPI (MoM)                     -0.2%                  -0.1%                     -0.2%      Unexpected Drop           

CHF        Retail Sales (YoY)                          0.6%                     1.6%                      1.8%       Unexpected Drop           

CHF        SVME PMI                                         47.3                       51.8                        49.1        Unexpected Drop

EUR        French Manufacturing PMI             48.5                        48.5                        48.5                                       

EUR        German Manufacturing PMI         51.0                       50.9                        50.9         Above Forecast              

 EUR       Manufacturing PMI                         48.8                       48.7                        48.7         Above Forecast              

 GBP      Manufacturing PMI                          52.1                       50.1                        49.7        Above Forecast               

 EUR       CPI (YoY)                                           2.7%                     2.7%                      2.7%

Scheduled Sovereign Bond Sales

Feb 01  15:30  Sweden  Details nominal bond auction on Feb 08

Feb 01  16:00  US

Announces details of 3Y Notes on Feb 07, 10Y Notes on Feb

08 & 30Y Bonds on Feb 09

Feb 02  09:50  France  OAT Auction

Feb 02  10.30  UK  Auctions 0.125% 2029