EUR/GBP Fundamental Forecast – August 29, 2016

The EUR/GBP is flat at 0.8552 with little data in the Eurozone and UK GDP meeting expectations. The pound got a bump as Business Investment surged higher than expected. Reuters reported that sterling hovered near a three-week high against the dollar on Friday, with traders awaiting the second reading of UK growth figures amid receding worries over the impact of Britain’s shock vote to leave the European Union.

The pound was on track for its best weekly performance in six weeks against the single currency, having hit a two-week high on Wednesday.

Short bets against sterling hit a record high in the week to Aug. 16, and traders said many speculators had been unwinding those positions and booking profits, which helped lift the currency.

Second-quarter gross domestic product data was being eyed for direction — though it only covers a week of the post-EU-referendum period — and should show how the UK economy held up during a time of heightened uncertainty.

“Growth accelerated unexpectedly in the second quarter according to the initial estimate despite any referendum-related uncertainties that may have weighed on economic activity,” said a senior analyst at IronFX Global.

The second estimate of the UK GDP for the second quarter met expectations and came out at 0.6% quarter-on-quarter, while the yearly change printed 2.2%. Sterling did not react in a volatile way, but stayed stronger on the day, with the EUR/GBP cross trading 0.15% lower around £0.8540.

From the euro perspective, French GDP decelerated notably in the second quarter to 0.0%, down from 0.6% previously. The yearly gauge slightly improved to 1.4% from 1.3% in the first quarter.

Meanwhile, Spanish retail sales eased to 3.1% year-on-year, down from 5.9% booked in June.

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August 29, 2016

Government Bond Auctions

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Aug 25 18:00 US Holds 7yr note auction

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