EUR/GBP Weekly Fundamental Analysis February 27 – March 2, 2012, Forecast

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Economic Events:

It is a very busy week with economic events combining the end and the beginning of a month.

Please see the daily fundamental forecasts for details on each of these events.             

Below are the only major events of the week.

The G20 Summit is taking place in Mexico this week.

Feb. 27

07:00

 

EUR

 

 

 

GfK German Consumer Climate 

 

 

 

 

 

 

 

 

10:30

 

CHF

 

 

 

KOF Leading Indicators 

 

 

 

 

 

 

 

 

11:00

 

GBP

 

 

 

CBI Distributive Trades Survey 

 

 

 

 

 

 

 

 

15:00

 

USD

 

 

 

Pending Home Sales (MoM) 

 

 

 

 

 

 

 

Feb. 28

08:15

 

CHF

 

 

 

Employment Level 

 

 

 

 

 

 

 

 

Tentative

 

EUR

 

 

 

German CPI (MoM) 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Core Durable Goods Orders (MoM) 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Durable Goods Orders (MoM) 

 

 

 

 

 

 

 

 

15:00

 

USD

 

 

 

CB Consumer Confidence 

 

 

 

 

 

 

 

 

19:00

 

USD

 

 

 

Beige Book 

 

 

 

 

 

 

 

Feb. 29

07:45

 

EUR

 

 

 

French Consumer Spending (MoM) 

 

 

 

 

 

 

 

 

08:55

 

EUR

 

 

 

German Unemployment Rate 

 

 

 

 

 

 

 

 

08:55

 

EUR

 

 

 

German Unemployment Change 

 

 

 

 

 

 

 

 

10:00

 

EUR

 

 

 

CPI (YoY) 

 

 

 

 

 

 

 

 

10:00

 

EUR

 

 

 

Core CPI (YoY) 

 

 

 

 

 

 

 

 

10:30

 

EUR

 

 

 

German 10-Year Bund Auction 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

GDP Price Index (QoQ) 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

GDP (QoQ) 

 

 

 

 

 

 

 

 

14:45

 

USD

 

 

 

Chicago PMI 

 

 

 

 

 

 

 

 

15:00

 

USD

 

 

 

Fed Chairman Bernanke Testifies 

 

 

 

 

 

 

 

Mar. 01

06:30

 

CHF

 

 

 

GDP (QoQ) 

 

 

 

 

 

 

 

 

08:30

 

CHF

 

 

 

SVME PMI 

 

 

 

 

 

 

 

 

09:00

 

EUR

 

 

 

Manufacturing PMI 

 

 

 

 

 

 

 

 

09:30

 

GBP

 

 

 

Manufacturing PMI 

 

 

 

 

 

 

 

 

10:00

 

EUR

 

 

 

CPI (YoY) 

 

 

 

 

 

 

 

 

10:00

 

EUR

 

 

 

Unemployment Rate 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Core PCE Price Index (MoM) 

 

 

 

 

 

 

 

 

13:30

 

CAD

 

 

 

Current Account 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Personal Spending (MoM) 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Initial Jobless Claims 

 

 

 

 

 

 

 

 

13:30

 

USD

 

 

 

Continuing Jobless Claims 

 

 

 

 

 

 

 

 

15:00

 

USD

 

 

 

ISM Manufacturing Index 

 

 

 

 

 

 

 

 

15:00

 

USD

 

 

 

Fed Chairman Bernanke Testifies 

 

 

 

 

 

 

 

Mar. 02

13:30

 

CAD

 

 

 

GDP (MoM) 

 

 

 

 

 

 

 

 

15:00

 

CAD

 

 

 

Ivey PMI 

 

 

 

 

 

 

 

                                                                                               

Monday, kicks off the week in Australia where the Labor Party will have the option to select a new leader after Prime Minister Julia Gillard announced a spill of the party due to ongoing tension between her and recently-departed Foreign Minister Kevin Rudd.

In the UK, January mortgage approvals data will be released, as well as the CBI distributive trades survey for February.

European Monetary Union money supply data for January will also be announced.

European Council president Jose Barroso speaks on the future of the European Union.

European Union competition commissioner Joaquín Almunia will appear before the European Parliament’s internal market and consumer protection committee. He will appear again on Tuesday.

US pending home sales index for January will be released, alongside the Dallas Federal Reserve manufacturing survey

Tuesday sees the release of February consumer confidence data in the US, alongside figures on durable goods orders for January.

Analysts expect orders to have fallen 0.5 per cent in the month, while consumer confidence may have risen two points to 63.1.

The S&P Case Shiller home price index will also be released, and is expected to show a 0.2 per cent fall in prices during the month of December. 

The Greek parliament will hold its vote on the second bailout granted to the country by the EU.

European Council President Barroso will address an EU conference.

Bank of England deputy governor Paul Tucker is due to talk at the British society of business economists annual dinner.

Wednesday the markets will be focused on the much  anticipated US gross domestic product data for the December quarter released in the US. Analysts are expecting the figures to confirm annualized growth figures of 2.8 per cent.

The US government’s Beige Book will also be released, its report on the country’s current economic situation.

In Australia the ABS will release retail trade data for January, as well as December quarter construction work figures.

Economists are tipping retail sales to have risen 0.5 per cent in the month, while a 1 per cent fall in construction activity is predicted.

January private sector credit data will also be released. Analysts expect the data to show a 0.3 per cent rise.

Rounding off a big day, the Australian Industry Group will release manufacturing index data.

The Chicago purchasing managers index figures and the weekly Energy Information Association petroleum status report will be released.

In the UK, GfK is due to release consumer confidence data for February.

January consumer credit for January is on tap, along with December quarter M4 money supply data.

Cleveland Federal Reserve president Sandra Pianalto will speak on the prospects for the US economy in the US.

EU internal market and services commissioner Michel Barnier will address a conference in Europe on the credibility of European governance.

In the US, Federal Reserve chairman Ben Bernanke will deliver his semi-annual monetary policy report.

Dallas Federal Reserve president Richard Fisher will give a speech on the US economy.

Philadelphia Federal Reserve president Charles Plosser will also speak.

Rounding off a busy Wednesday, the EU is due to release advice on potential competition and capital rules for trade settlement in the region.

Thursday in the US.car sales data and construction spending figures will be released along with jobless claims data and the ISM manufacturing index for February is on tap. The index is tipped to show a reading of around 55, indicating ongoing expansion.

Personal income and outlays figures will also be released. Economists are tipping the figures to show a 0.5 per cent rise in incomes and a 0.4 per cent lift in spending.

EU leaders will kick off a two day economic summit in Europe. Before the event, EU conservative leaders will hold a pre-summit meeting.

European commissioner for economic and monetary affairs Olli Rehn will deliver an address to the CEPS.

Atlanta Federal Reserve president Dennis Lockhart will speak on the US economy and banking.

Friday brings Greece back into focus with the Greek gross domestic product data which will be heavily monitored in the wake of the approval of its second EU bailout.

US Federal Reserve president James Bullard will deliver an address on the US economy in the aftermath of the financial crisis.

Historical:

Highest: 1.2336 EUR on 29 Jun 2010.

Average: 1.1548 EUR over this period.

Lowest: 1.0686 EUR on 13 Oct 2009.

Rule:

EUR/GBP: The cross tends to move in ranges, with relatively clear barriers. The narrower ranges made it somewhat harder, but it seems to return to wider ranges. The GBP is does not seem to move in response to the EUR as directly currently. The UK austerity program vs. The EU debt crisis seems to have them moving in opposing distances. They are developing new trading personalities and there is a good deal of profit to be made trading this pair. They can be volatile.

Characteristics

Average broker spread: 2-3 pips 
Daily range average: 25-50 pips 

The interest rate differential between the European Bank(ECB) and the Bank of England(BoE)

  • European and UK economic data
  • Growth differentials between the Euro zone and UK

 

Analysis and Recommendations

The EUR/GBP ended the week at 0.8474 as the euro picked up steam all week, it rolled over all of its trading partners. The euro surged on relief over Greece and strong economic data from Germany and news on the Greece PSI arrangements. The euro should settle back down this week. There were also worrying statement from the BoE the past week, but some better then expected news on the mortgage front.

Highlights of major economic events for the week of February 20-24, 2012

The sale of new single-family homes in the U.S. fell slightly in January, but only because sales in December were revised higher. Taken together, sales in those two months were the strongest in a year, a good sign for a market that’s been in a deep slump since the 2007-2009 recessions.

Consumer sentiment rose in February to the highest level in a year on strong awareness of improving employment, according to a gauge released Friday by the University of Michigan

Consumer sentiment rose to 75.3 in February from 75 in January, achieving a sixth month of improvement. Consumers’ expectations rose to 70.3 from 69.1, while their views on current conditions declined to 83 from 84.2.

In the UK today Q4 2nd Estimate GDP -0.2% q/q; +0.7% y/y LONDON (MNI) – Household spending rose for the first time in over a year in the fourth quarter and net exports boosted growth, but these were offset by a large fall in investment spending, figures from National Statistics showed Friday

In France today February consumer confidence up 82; January 81 (unrevised) –Matches expectations; MNI analysts survey median forecast 82 –Buying-propensity up 5 points –Future inflation worries down 2 points –Jobless fears down 1 point

The European Commission sharply reduced its forecasts for growth in the EU and the Eurozone for 2012 while also raising its forecasts for inflation, suggesting that the European economy could struggle with stagflation in 2012 The Commission said the economy in the 27-member EU will not grow at all this year.

In the UK Jan Mortgage Approvals Highest Since Dec 2009 says British Bankers Assn. January mortgage approvals rose to their highest level since December 2009

Germany preliminary December machine output -1.9% y/,y. Also Germany’s Business morale up more than expected.

Italian consumer confidence rose to 94.2 from 91.8 in Jan when it had posted a 16-year low. The improvement was the result of better sentiment in the general economic climate.

Fitch downgraded Greece’s credit rating.

Eurozone Nov Industrial orders revised to -1.1% from -1.3%, y/y revised to -2.5% from -2.7% A much stronger set of numbers including the revisions.

Eurozone Feb Flash composite PMI 49.7 from 50.4 – expected 50.6

German February flash manufacturing PMI 50.1

French February flash manufacturing PMI 50.2

Bank of England Governor Mervyn King said the BOE was expecting a “zigzag” pattern of the quarterly growth this year and the detailed forecasts underpinning the quarterly Inflation Report, published Wednesday, bear this out.

In the UK Public Borrowing reported the highest surplus since January 2008, and along with revisions to previous data, suggest borrowing is on track to undershoot the latest forecasts

Greek bailout will “likely” get final approval in the week starting March 12, according to statement on Finnish Finance Ministry website. “The final approval for activating the EFSF guarantees and completing the PSI operation are conditional on the Troika and the eurogroup deeming the PSI as successful and Greece to have fulfilled its commitments” 

China’s VP Xi Jinping, in a speech in Dublin last night, said his country is considering more support for Europe. The official said “We are considering more involvement in helping address the European debt issue through EFSF, ESM and other channels” adding “China supports the European integration process, the euro, by purchasing European bonds.”

UK Gross mortgage lending fell 14.1% on the month in January but was up 10.2% on a year ago, according to Council of Mortgage Lenders data. As the CML figures are not seasonally adjusted it said the monthly fall in January was not unexpected. The 10.2% rise on the year.

In Japan, Department store sales in Japan were hit by record snowfalls in some regions in January, slipping 1.1% on year and giving up a 0.8% rise in December, data released by the Japan Department Stores Association showed on Monday. 

Japan posts the highest trade deficit in history. The Bank of Japan says its January real export index rose a seasonally adjusted 0.2% m/m to 116.5 (100 for the 2005 base year), posting the second consecutive monthly gain, after +1.1% in December and -2.7% in November. The January reading was the highest since 118.2 in October.  The Bank of Japan Governor Masaaki Shirakawa renewed his pledge to maintain the BOJ’s monetary easing while also repeating that the bank’s new explicit 1% inflation goal is similar in nature to the Federal Reserve’s own 2% price target. 

Feb. 20

 

GBP

 

 

 

Rightmove House Price Index (MoM) 

4.1%

     

-0.8%

 

 

Feb. 21

 

AUD

 

 

 

Monetary Policy Meeting Minutes 

         

 

 

 

 

NZD

 

 

 

Inflation Expectations (QoQ) 

2.5%

     

2.8%

 

 

 

 

CAD

 

 

 

Core Retail Sales (MoM) 

0.0%

 

0.2%

 

0.4%

   

 

 

CAD

 

 

 

Retail Sales (MoM) 

-0.2%

 

-0.2%

 

0.4%

   

 

 

CAD

 

 

 

Wholesale Sales (MoM) 

0.9%

 

0.5%

 

-0.3%

   

Feb. 22

 

AUD

 

 

 

Wage Price Index (QoQ) 

1.0%

 

0.8%

 

0.7%

 

 

 

 

EUR

 

 

 

French CPI (MoM) 

-0.4%

 

0.3%

 

0.4%

 

 

 

 

EUR

 

 

 

French Manufacturing PMI 

50.2

 

48.7

 

48.5

 

 

 

 

EUR

 

 

 

German Manufacturing PMI 

50.1

 

51.5

 

51.0

 

 

 

 

EUR

 

 

 

Manufacturing PMI 

49.0

 

49.4

 

48.8

 

 

 

 

EUR

 

 

 

Industrial New Orders (MoM) 

1.9%

 

0.6%

 

-1.1%

   

 

 

USD

 

 

 

Existing Home Sales 

4.57M

 

4.67M

 

4.38M

   

Feb. 23

 

EUR

 

 

 

German Ifo Business Climate Index 

109.6

 

108.8

 

108.3

 

 

 

 

EUR

 

 

 

German Current Assessment 

117.5

 

116.5

 

116.3

 

 

 

 

EUR

 

 

 

German Business Expectations 

102.3

 

102.0

 

100.9

 

 

 

 

GBP

 

 

 

BBA Mortgage Approvals 

38.1K

 

37.3K

 

36.6K

   

 

 

GBP

 

 

 

CBI Industrial Trends Orders 

-3

 

-13

 

-16

 

 

 

 

USD

 

 

 

Initial Jobless Claims 

351K

 

354K

 

351K

   

 

 

USD

 

 

 

Continuing Jobless Claims 

3392K

 

3460K

 

3444K

   

Feb. 24

 

EUR

 

 

 

German GDP (QoQ) 

-0.2%

 

-0.2% 

 

-0.2% 

 

 

 

 

GBP

 

 

 

Business Investment (QoQ) 

-5.6%

 

-0.4% 

 

1.0% 

   

 

 

GBP

 

 

 

GDP (QoQ) 

-0.2%

 

-0.2% 

 

-0.2% 

 

 

 

 

USD

 

 

 

Michigan Consumer Sentiment Index 

75.3

 

72.5 

 

72.5 

 

 

 

 

USD

 

 

 

New Home Sales 

321K

 

315K 

 

324K 

   

 

Sovereign Bond Auction Schedule

Feb 27-Mar 02 n/a  UK  Mini Tender

Feb 27  10:10  Italy   BOT auction

Feb 27  10:30  Germany  Eur 3.0bn Feb 2013 Bubill

Feb 27  11:00  Belgium  OLO Auction

Feb 27  12:00  Norway  Details bond auction on May 05

Feb 28  01:30  Japan  Auctions 2Y JGBs

Feb 28  10:10  Italy   BTP/CCTeu auction

Feb 28  10:30  Belgium  Auctions 3 & 6M T-bills

Feb 28  15:30  UK  Details gilt auctions on Mar 06 & Mar 07

Feb 29  10:10  Sweden  Auctions T-bills

Feb 29  10:30  Germany  Eur 4.0bn 2.0% Jan 2022 Bund

Feb 29  15:30  Sweden  Details nominal bond auction on Mar 07

Mar 01  09:30  Spain  Bono auction

Mar 01  09:50  France  OAT auction

Mar 01  10.30  UK  Auctions 4.0% 2022 conventional Gilt

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About: FX Empire Analyst - Barry Norman

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