EUR/GBP Fundamental Forecast – September 15, 2016

The Euro gave up earlier gains after the British Pound strengthened. This led to a EUR/GBP close at .8499, down .0003 or -0.035%. The move produced a technical reversal top which is typically a sign that investor sentiment is shifting to the downside.

In economic news on Wednesday, Eurostat reported that industrial production was down 1.1% in June compared to a 0.8% increase the month before and the pre-report estimate of minus 0.9%.

Wednesday’s U.K. employment data showed a resilient British jobs market that remains unfazed a little more than two months after the country voted to leave the European Union. Wednesday’s report showed there are more people in work than ever before.

According to the Office for National Statistics (ONS), employment rose by 174,000 to 31.77 million in the three months to July. This is the highest level since records began more than 40 years ago, with the increase in the number of people in work slightly higher than expected by economists.

Additionally, Britain’s jobless rate remained at an 11-year low of 4.9 percent in the quarter to July, while the number of people claiming unemployment benefits rose by 2,400 to 771,000 in August.

The report received mixed reviews because the data also showed a slowdown in wage growth. Average weekly earnings, including bonuses, rose by 2.3 percent in the quarter to July compared with a year ago, slowing from 2.5 percent in the second quarter. Excluding bonuses, earnings rose by 2.1 percent year-on-year, against expectations.

The EUR/GBP began to weaken after the traders interpreted the U.K. jobs report to mean a strong economy over the short-run. Essentially, it means that the labor market is still showing improvement based on the record high in the employment rate and the inactivity indicator at a new record low.

In reality, the report shows that any negative demand side effect of Brexit on employment may not be having a bad impact after two months, but is likely to take about 2 to 3 years to work its way through the economy. One economist suggested the fallout from Brexit will have a “slow burn” effect on demand for jobs.

The strength of the UK jobs data may convince the Bank of England to leave interest rates and current stimulus unchanged when it makes its monetary policy decision on Thursday. This may have triggered the strong position-squaring rally late in the session.

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.

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Thursday, September 15, 2016

Government Bond Auctions

Date/Time Country Type

Sep 14 11:05 Norway Holds bond auction

Sep 14 11:30 UK 0.125% 2046 I/L Gilt

Sep 14 11:30 Germany Eur 1bn 2.5% Jul 2044 Bund

Sep 15 10:30 Spain Holds bond auction

Sep 15 11:03 Sweden Holds I/L bond auction

Sep 15 11:50 France Holds bond auction