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EUR/GBP Fundamental Forecast – September 1, 2016

By:
James Hyerczyk
Updated: Aug 31, 2016, 20:30 UTC

The EUR/GBP was under pressure most of the session on Wednesday with investors reacting to stronger than expected housing data from the U.K. and benign

EUR/GBP

The EUR/GBP was under pressure most of the session on Wednesday with investors reacting to stronger than expected housing data from the U.K. and benign data from the Euro Zone. The Forex pair was last trading .8493, down -0.0240 or -0.28%.

The British Pound found support from traders after the release of the better-than-expected Nationwide HPI report. The data came in at 0.6%, beating the -0.1% estimate.

The price action indicates that investors were pleased with the positive outcome of the housing report since this sector was feeling the worst of the U.K.’s decision to leave the European Union. The rise in the HPI was a welcome surprise because data showed that housing market activity has slowed in recent months. New buyer inquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum.

Recent price action suggests that EUR/GBP investors may be increasing bets that the Bank of England will refrain from a rate cut and additional stimulus when it next meets on September 15. The inability to rally through the recent highs suggest that the experts may have been a little too gloomy about the outcome of Brexit.

Helping to pressure the EUR/GB P was flat economic data from the Euro Zone, despite massive amounts of stimulus from the European Central Bank. This includes the implementation of negative interest rates. Euro Zone Core CPI came in at 0.2%, slightly below the 0.3% estimate. The Euro Zone Unemployment Rate was 10.1%, in line with expectations. The low readings have investors discussing the possibility of fiscal action to stimulate the economy.

With investors reacting to the possibility the Bank of England will refrain from additional stimulus in September and Euro investors talking about fiscal stimulus, it looks as if the EUR/GBP will continue to weaken over the near-term. The only way I can see a rally by the currency pair is if the BoE comes in with new stimulus measures or cuts rates at its monetary policy meeting in mid-September.

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.

30-Minute EURGBP

Today’s economic releases:

Cur. Event Actual Forecast Previous
  JPY Industrial Production (MoM) (Jul)        0.0% 0.8% 2.3%
  AUD RBA Assist Gov Debelle Speaks      
  AUD HIA New Home Sales (MoM) (Jul) -9.7%                8.2%
  NZD ANZ Business Confidence (Aug) 15.5   16.0
  AUD Private Sector Credit (MoM) (Jul) 0.4% 0.4% 0.2%
  GBP Nationwide HPI (MoM) (Aug) 0.6%  -0.3% 0.5%
  GBP Nationwide HPI (YoY) (Aug) 5.6% 4.8% 5.2%
  EUR German Retail Sales (MoM) (Jul) -1.5%  0.5% -0.1%
  USD FOMC Member Rosengren Speaks      
  EUR German Unemployment Change (Aug) -7K  -5K -7K
  EUR German Unemployment Rate (Aug) 6.1%  6.1% 6.1%
  EUR Core CPI (YoY) (Aug)  0.8% 0.9% 0.9%
  EUR CPI (YoY) (Aug) 0.2%  0.3% 0.2%
  EUR Unemployment Rate (Jul)  10.1% 10.0% 10.1%
  USD FOMC Member Kashkari Speaks      
  USD ADP Nonfarm Employment Change (Aug) 177K  175K 179K
  CAD GDP (MoM) (Jun) 0.6%  0.4% -0.6%
  CAD GDP (QoQ) (Q2) -0.4%    0.6%
  CAD GDP Annualized (QoQ) (Q2) -1.6%  -1.5% 2.4%
  USD Chicago PMI (Aug) 51.5  54.0 55.8
  USD Pending Home Sales (MoM) (Jul) 1.3%  0.6% 0.2%
  USD Crude Oil Inventories 2.276M 0.921M 2.501M
  USD Cushing Crude Oil Inventories -1.039M    0.375M
  AUD AIG Manufacturing Index     56.4
  JPY Capital Spending (YoY) (Q2)   5.6% 4.2%
  CNY Manufacturing PMI (Aug)   49.9 49.9
  CNY Non-Manufacturing PMI (Aug)     53.9
  AUD Private New Capital Expenditure (QoQ) (Q2)   -4.2% -5.2%
  AUD Retail Sales (MoM) (Jul)   0.3% 0.1%
  CNY Caixin Manufacturing PMI (Aug)   50.1 50.6
  JPY 10-Year JGB Auction     -0.047%

Upcoming Economic Events that you should be monitoring:

Thursday, September 1, 2016

Cur. Imp. Event Actual Forecast Previous
  EUR German Manufacturing PMI (Aug)   53.6 53.6
  EUR Manufacturing PMI (Aug)   51.8 51.8
  GBP Manufacturing PMI (Aug)   49.0 48.2
  USD Initial Jobless Claims   265K 261K
  USD Nonfarm Productivity (QoQ) (Q2)   -0.6% -0.5%
  USD Unit Labor Costs (QoQ) (Q2)   2.1% 2.0%
  USD Manufacturing PMI (Aug)   52.1 52.1
  USD ISM Manufacturing Employment (Aug)   49.6 49.4
  USD ISM Manufacturing PMI (Aug)   52.0 52.6
  EUR ECB’s Nowotny Speaks      
  USD FOMC Member Mester Speaks    

Government Bond Auctions

Date/Time Country Type

Aug 31 11:05 Norway Holds bond auction

Aug 31 11:30 Germany Eur 4bn Sep 2018 Schatz

Sep 01 10:30 Spain Holds bond auction

Sep 01 11:30 UK Jul 2022 Gilt

Sep 01 11:50 France Holds bond auction

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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