EUR/GBP Fundamental Analysis October 10, 2014 Forecast

Analysis and Recommendations: After posting a six-day counter-trend rally, the EUR/GBP closed lower on Thursday. The recent rally was likely triggered by short-covering because of grossly oversold conditions so if there is a follow-through break today, traders should anticipate a resumption of the downtrend.

The weakness in the Euro was caused by a negative comment by European Central Bank President Mario Draghi. He ignited the sell-off when he said the central bank must lift inflation from an “excessively low” level. This was interpreted to mean that the ECB was prepared to implement additional stimulus measures.

Thursday’s reaction shows just how sensitive the Euro is to any negative comments. It also indicates that the short-term rallies are just short-covering, designed to alleviate the selling pressure, but also to set up the next shorting opportunity.

On Thursday, the Bank of England policymakers decided to keep its benchmark interest rate at a record low. Policymakers debated over data which showed the weakening Euro Zone economy weighing on the U.K. economy as well as domestic growth reports showing signs of losing momentum.

BOE President Mark Carney most likely argued for more time for the economy to recover before starting to raise rates. The nine-member Monetary Policy Committee was probably split like it has been during the last two meetings. The market’s weakness reflected traders decreasing bets of a rate increase in early 2015.

Trader reaction to today’s U.K. Trade Balance figures could set the tone for the session.

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 up to the data analysis and information in our weekly reports

 

Today’s Economic Releases

 

                Currency                                                  Event                                                     Forecast        Previous

                

                 EUR                                          French Industrial Production                                 -0.2%             0.2%

                 GBP                                          Trade Balance                                                       -9.6B             -10.2B

                 CAD                                          Employment Change                                            18.7K            -11.0K

                 CAD                                          Unemployment Rate                                              7.0%              7.0%

                 USD                                          Import Prices m/m                                                -0.5%             -0.9%

                 USD                                          FOMC Member Plosser Speaks

                 ALL                                           IMF Meetings

                 CAD                                          BOC Business Outlook Survey

                 ALL                                           G20 Meetings

                 USD                                          FOMC Member Fisher Speaks