EUR/GBP Fundamental Forecast – August 24, 2016

The EUR/GBP is down 47 points at 0.8602 as the euro gained on better than expected PMI data while the pound remained stronger on positive sentiment. The pound was on the front foot recovering some of the losses it incurred on Friday, when reports emerged suggesting the UK could invoke Article 50 to begin the formal process of exiting the EU early next year.

Downing Street has since downplayed the rumors, delivering sterling a boost. As of mid-afternoon, the UK currency was up 0.32 against the euro.

Euro-sterling parity is a reality that wholesale traders, and Britons going abroad, are going to have to get used to as soon as next year if forecasts by HSBC and UBS are to be believed.

A one-for-one exchange rate would be a first for the pound. And even with an 11pc slide since the Brexit vote, the UK currency is still some way from its all-time low of 98.03 pence per euro at the height of 2008’s global crisis.

The European Union buys about half of Britain’s goods and services, and the June 23 decision to leave has hurt the pound by stirring concerns the nation will struggle to fund its record current-account deficit of 5.4pc of gross domestic product.

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Upcoming Economic Events that you should be monitoring:

August 24, 2016

Government Bond Auctions

Date Time Country Auction

Aug 24 10:03 Sweden Holds bond auction

Aug 24 10:30 Germany Eur 4bn 0% Oct 2021 Bobl

Aug 24 18:00 US Holds 2yr FRN auction & 5yr note auction

Aug 25 18:00 US Holds 7yr note auction

Aug 26 10:10 Italy Holds zero coupon