Weekly Analysis and Recommendations The EUR/GBP will open the week at 0.7566 seeing a loss of 1.19% as the euro declined after the ECB comments and
The EUR/GBP will open the week at 0.7566 seeing a loss of 1.19% as the euro declined after the ECB comments and lackluster manufacturing data. The UK also saw poor data releases with retail sales missing expectations by a large margin. European Central Bank president Mario Draghi is still able to push through his agenda and will not allow himself to be dissuaded from pursuing further policy stimulus, one of the world’s most influential brokers said.
In an about-face, analysts at Goldman Sachs said they were wrong to believe the ECB’s ‘reaction-function’ had changed at its 3 December policy meeting; more specifically, Draghi’s ability to push through necessary easing. Instead of focusing on global inflation trends, investors should keep in mind that in order to meet the ECB’s projection for a “modest” rise of 1.3% in ‘core’ HICP inflation, month-on-month core HICP would need to double versus its pace last year.
The British Pound continued to weaken against the USD but hold up relatively better against the EUR. Slightly weaker than expected UK growth and persistently low inflation implies the Bank of England is under no immediate pressure to tighten monetary policy, however. The “Brexit” issue remains a significant downside risk for the pound in 2016. HSBC The London-based bank said that political concerns surrounding the referendum on Britain’s membership of Europe – due by 2017 but widely expected to come at some point this year – were weighing on sterling sooner than they had expected them to.
“The UK will need to get beyond ‘Brexit’ fears before sterling can strengthen, but once it does, the rally is set to be sizeable,” the bank’s currency strategists wrote in a research note.
The bank reckons strong domestic demand will force the Bank of England to raise interest rates much sooner than markets expect – investors are currently betting that rates will stay at their record lows until 2017. That should also boost the pound.
FxEmpire provides in-depth analysis for each currency and commodity 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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.
Major Economic Events for the week:
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Cur. |
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Event |
Actual |
Forecast |
Previous |
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Monday, January 25, 2016 |
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EUR |
German Ifo Business Climate Index |
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108.4 |
108.7 |
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Tuesday, January 26, 2016 |
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Holiday |
Australia – Australia Day |
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USD |
CB Consumer Confidence (Jan) |
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96.5 |
96.5 |
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Wednesday, January 27, 2016 |
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AUD |
CPI (QoQ) (Q4) |
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0.3% |
0.5% |
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USD |
New Home Sales (Dec) |
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500K |
490K |
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USD |
Crude Oil Inventories |
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3.979M |
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Thursday, January 28, 2016 |
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NZD |
Interest Rate Decision |
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2.50% |
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GBP |
GDP (YoY) (Q4) |
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1.9% |
2.1% |
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GBP |
GDP (QoQ) (Q4) |
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0.5% |
0.4% |
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USD |
Core Durable Goods Orders (MoM) |
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-0.2% |
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USD |
Pending Home Sales (MoM) (Dec) |
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0.7% |
-0.9% |
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Friday, January 29, 2016 |
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EUR |
CPI (YoY) (Jan) |
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0.4% |
0.2% |
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USD |
GDP (QoQ) (Q4) |
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0.8% |
2.0% |
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CAD |
GDP (MoM) (Nov) |
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0.2% |
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Upcoming Government Bond Auctions
Date Time Country
Jan 25 11:30 Germany EUR 1.5bn Jan 2017 Bubill
Jan 25 13:00 Norway Details of bond auction on Jan 27
Jan 25 17:20 Italy Details of BTP/CCTeus on 28 Jan
Jan 26 11:10 Italy Holds CTZ/linker bond auction
Jan 26 n/a US Holds 2-year note auction
Jan 27 11:05 Norway Holds bond auction
Jan 27 11:30 Germany EUR 1bn 2.5% Aug 2046 Bund
Jan 27 17:20 Sweden Details of bond auction on 03 Feb
Jan 27 n/a US Holds 2-year FRN auction
Jan 27 n/a US Holds 5-year note auction
Jan 28 11:03 Sweden Holds I/L bond auction
Jan 28 11:10 Italy Holds BTP/CCTeus auction
Jan 28 n/a US Holds 7-year note auction
Feb 02 n/a UK Details of Gilt auctions on Feb 09 & 11