EUR/GBP Fundamental Forecast – February 5, 2016

Analysis and Recommendations:

The EUR/GBP added 7 points to 0.7614 as both currencies rallied today. Traders heard from Mario Draghi as well as Mark Carney but neither said much outside of current expectations. As oil prices climbed and the US dollar eased traders seemed to start moving back to risk on trading.

Last week, the Bank of England governor, Mark Carney, warned that concerns about Brexit could test “the kindness of strangers” – with the UK dependent on inflows of foreign capital to fund its hefty current account deficit with the rest of the world.

The Goldman team noted that the pound tumbled 20% on a trade-weighted basis during the global financial crisis between July 2008 and March 2009, and the current account deficit moved from 3.4% of GDP – similar to the current deficit – to virtually zero.

However, the analysts added that their forecasts are “based on a view that the UK will remain in the EU and that, as a result, the underlying dynamics will remain solid in the UK economy”. They continue to forecast the pound at $1.40 and the euro-sterling exchange at £0.68 in 12 months’ time.

David Cameron will step up efforts to finalise the details of his EU reform package amid signs Brexit campaigners are struggling to find a “big beast” to lead them.

The Prime Minister will meet key players in the process, including the presidents of the European Council and European Parliament, as he continues work to secure a deal.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

 

Upcoming Economic Events that you should be monitoring:

Friday, February 5, 2016

Government Bond Auctions

Date Time and Country

Feb 04 11:50 France Holds bond auction

Feb 04 17:20 Sweden Details of I/L bond auction on Feb 11

Feb 08 16:20 Italy Details of bond auction

Feb 09 11:00 Netherlands Holds DSL auction

Feb 09 11:00 Austria Holds bond auction

Feb 09 11:30 Germany Holds I/L bond auction

Feb 09 11:30 UK 0.125% 2026 Gilt linker auction

Feb 09 n/a UK Details of Gilt auction on Feb 17

Feb 09 19:00 US Holds 3-year note auction

Feb 10 11:30 Germany Euro 5bn Mar 2018 Schatz

Feb 10 17:20 Sweden Details of bond auction on Feb 17

Feb 10 19:00 US Holds 10-year note auction

Feb 11 N/A Italy Euro 4-5bn 30-yr syndicated bond auction

Feb 11 11:03 Sweden Holds I/L bond auction

Feb 11 11:10 Italy Announces details of bond auction

Feb 11 11:30 UK 3.5% 2045 Gilt auction

Feb 11 19:00 US Holds 30-year bond auction

Feb 11 n/a US Details of 30-yr TIPS auction on Feb 18

Feb 12 11:10 France Details of bond auction on 18 Feb