EUR/GBP Fundamental Analysis – week of September 5, 2016

The EUR/GBP closed the week at 0.8400 and is signaling a strong buy in the upcoming week. The pair fell 1.47% on the strength of the pound after strong PMI data. The euro is weak heading into the ECB meeting on Thursday.  The European Union’s statistics agency Wednesday said consumer prices were 0.2% higher in August than during the same month a year earlier. That was a surprise, since economists surveyed by The Wall Street Journal last week had estimated that prices rose by 0.3%.

The figures won’t come as a shock to ECB President Mario Draghi, who warned in July that inflation rates were likely to remain “very low” over coming months, before picking up toward the end of the year.

There are some signs of stronger consumer demand that could eventually drive prices higher within the Eurozone. Germany’s statistics agency reported Wednesday that retail sales were up 1.7% in July from June, the largest increase since January 2014.

With the U.K.’s decision to leave the EU threatening to slow the Eurozone’s modest recovery further, the ECB has indicated it may have to provide yet more stimulus to meet its objective.

The GBP has had its longest run of gains since before Britain voted to leave the European Union as data signal the economic consequences of the decision may be less dire than some analysts feared. Sterling climbed to its highest level in almost a month versus the dollar, extending its advance into a third week.

A report showing a gauge of UK construction rebounded last month more than economists forecast added to the sense of optimism, with the currency approaching the strongest level in four weeks against the euro. The pound jumped versus all its 31 major counterparts this week, bolstered by data that showed improvements in manufacturing output and household confidence.

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

 Government Bond Auctions

Date Time       Country           Auction

Sep 06 11:00 Austria Holds bond auction

Sep 06 11:30 UK 1.5% 2026 Gilt

Sep 06 11:30 Germany Holds I/L bond auction

Sep 07 10:30 Denmark Holds bond auction

Sep 07 11:03 Sweden Holds bond auction

Sep 07 11:30 Germany Eur 5bn 0% Aug 2026 Bund

Sep 08 11:00 Ireland Holds bond auction

Sep 08 17:20 Italy Announces details of bond auction