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EUR/GBP Fundamental Analysis – for the week of August 9, 2016

By:
Barry Norman
Published: Aug 6, 2016, 06:06 UTC

The EUR/GBP ended a busy week at 0.8484 as the pound was whacked by the Bank of England rate decrease and the additional stimulus and a shift to start

EUR/GBP Fundamental Analysis – for the week of August 9, 2016

The EUR/GBP ended a busy week at 0.8484 as the pound was whacked by the Bank of England rate decrease and the additional stimulus and a shift to start buying corporate bonds. The pound fell almost 200 points while the euro remained quiet this past week. In the coming week the pair is expected to adjust but the euro is expected to outperform. The pair is up almost 20% this year.

The BOE sharply cut its growth forecast for 2017, marking the biggest downgrade since it began publishing such forecasts in 1993, saying the outlook had “weakened materially.”

Central banks, including the Federal Reserve and the European Central Bank, say they are watching closely in case the move toward Brexit sparks another damaging bout of financial-market contagion and economic instability. However, the fallout so far appears confined to the U.K., with early signs that the U.S. and Eurozone economies have shrugged off the surprise result.

The pound fell 1.4% while the yield on 10-year U.K. government bonds, known as gilts, fell to a record low of 0.644% before recovering slightly. London’s FTSE 100 index reversed earlier losses to close up, with financial shares climbing steadily.

The BOE painted a subdued picture in a fresh set of quarterly economic forecasts, although it said the U.K. economy would probably avoid an outright recession. It cut its growth forecast for 2017 to 0.8% from 2.3% in May, and trimmed its 2018 forecast to 1.8% from 2.3%.

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This Week’s Economic Events That You Should Be Monitoring:

Date Country Name Volatility Previous Consensus
8/9/2016 GBP NIESR GDP Estimate (3M) 3 0.6
8/10/2016 AUD RBA’s Governor Stevens 3
8/10/2016 NZD RBNZ Interest Rate Decision 3 2.25 2
8/10/2016 NZD Monetary Policy Statement 3
8/10/2016 NZD RBNZ Press Conference 3
8/12/2016 EUR Gross Domestic Product M 3 0.3 0.3
8/12/2016 EUR Gross Domestic Product Y 3 1.6 1.6
8/12/2016 USD Retail Sales (MoM) 3 0.6 0.4

Government Bond Auctions

Date Time           Country               Auction

Aug 09 11:15 Austria Optional bond auction

Aug 09 19:00 US 3-yr Note auction

Aug 10 11:00 Germany EUR 5B 0% 2026 Bund

Aug 10 19:00 US 10-yr Note auction

Aug 11 11:30 UK 0.125% I/L 2036

Aug 11 19:00 US 30-yr Bond auction

 

 

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