EUR/GBP Weekly Fundamental Analysis February 6-10, 2012, Forecast

Economic Events:

EUR/GBP Weekly Fundamental Analysis February 6-10, 2012, Forecast

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 

What moves EUR/GBP?

• 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

Trading the EUR/GBP 

Applying Technical Analysis and Analyzing Fundamental News from the Euro and UK zone. EUR/GBP is excellent for the beginning forex trader because it’s low volatility. 

Analysis and Recommendations

The EUR/GBP followed the trend this week closing at 0.8322 the euro fell to the 1.3050 range against the USD  and then recovered. In the UK there was positive information for the manufacturing and services area.

The markets all week have been reacting only to news and economic reports. US jobs data and unemployment figures surprised the market this week, adding 243k jobs and unemployment dropping to 8.3%. Overall this was a strong week for the US and the greenback.

After reacting to the news and pushing the dollar up against all major currencies, the markets realized that this would reduce the need for Fed intervention, diminishing the chances of more QE or changes in monetary policy. Compounding this with more craziness is Greece, the USD gave back some of its gains.

Greece is still not resolved and the special meeting of the EU that was scheduled for Monday to review the Greek proposal has been cancelled.

There are several problems, which include Germany wanting to have more control over the Greek budget in the future, since it will be mostly German taxpayers who will be funding the bailout. Also the Greek politicians are not supportive of the addition austerity measures, facing elections in April; many political leaders are more concerned with re-election that demands from the EU and IMF.

The Greek Prime Minister said in a statement on Saturday, that the deal will be concluded by the end of the Sunday, satisfying politicians, creditors and the EU, ECB and IMF. The markets will await this new agreement.

The U.S. dollar was boosted on Friday, after stronger-than-forecast U.S. employment data dampened expectations that the Federal Reserve will implement fresh monetary easing measures to stimulate growth.

Also on Friday report showing a greater-than-expected expansion in the U.S. service sector in January also boosted the greenback.

On Thursday Fed Chairman Ben Bernanke said the economy has shown “signs of improvement” but warned that the outlook remained “uncertain”.

Strength:

1) US- Jan Payroll gains show big upside surprise of 243k, about 100k more than expected, unemployment rate falls to 8.3%

2)  US- ISM services index rises to best since Feb ’11

3)  US-ISM manufacturing up 1 pt but touch less than expected

4) US -Jan vehicle sales at 14.1mm is best since clunker month in Aug ’09 and the most since May ’08 before that

5) US – savings rate rises to 4% from 3.5%

6) US -Initial Jobless Claims fall 12k

7) Germany -unemployed fall again, rate at 6.7%

8 ) UK- manufacturing and services PMI figures both rise

9) Eurozone- manufacturing and services PMI in line with initial

10) Portuguese bond yields fall from highs, Italian yields lower too with Spain flat

11)China – manufacturing PMI stays above 50, Taiwan and South Korea rise but remain below 50

12) India – manufacturing and services PMI both jump

Weakness:

1) US- Jan Consumer Confidence falls almost 4 pts to 61.1, well below expectations of 68 as labor market answers soften and those that plan to buy a home falls to lowest since Aug and those that plan to buy a car down at lowest since Oct ’10

2) US -CS home price index falls to lowest since Feb ’03

3) US -MBA said refi’s fell 3.6% and purchase apps were down 1.7%

4) Canada – Jan jobs report disappoints

5) China – PMI services index falls to 52.9 from 56, the 2nd lowest since Feb ’11

6) Taiwan -economy in a recession after Q4 contraction q/o/q

7) Greek- debt discussions for another week are hours away from wrapping up, becoming a nightmare

8 )Eurozone -Amount of LTRO funds from ECB continue to be redeposited with the ECB

Feb 07  09:00  Netherlands Eur 5.0bn Jul 2022 DSL

Feb 07  10:10  Greece  6M T-bill auction

Feb 07  10.30  UK  Auctions 1.75% 2017 conventional Gilt

Feb 07  15:30  UK  Details gilt auction on Feb 16

Feb 07  18:00  US  Auctions 3Y Notes

Feb 08  10:10  Sweden  Nominal bond auction

Feb 08  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Feb 08  10:30  Swiss  Bond auction

Feb 08  16:30  Italy   Details BOT auction on Feb 13

Feb 08  18:00  US  Auctions 10Y Notes

Feb 09  10:10  Sweden  Sek 0.75bn I/L bond auction

Feb 09  15:30  Sweden  Details I/L bond auction on Mar 23

Feb 09  16:00  US  Announces auctions of 30Y TIPS on Feb 16

Feb 09  16:30  Italy   Details BTP/CCTeu auction on Feb 14

Feb 09  18:00  Italy   Auctions 30Y Bonds

Feb 10  11:00  Belgium  OLO auction