EUR/GBP Fundamental Analysis October 31, 2014 Forecast

Analysis and Recommendations:

The EUR/GBP fell 22 points today to trade at 0.7868 after the euro tumbled against the US dollar. The euro lost all support when the FOMC statement was issued showing things remained on track in the US with all stimulus ceasing on the 1^st and a positive assessment by the committee. The pound eased today against the strong greenback with both currencies displaying weakness. News out of Greece weighed heavily on the euro in today’s session. Greek bond investors face a rollercoaster ride for the next four months as the government tries to contain the risk of snap elections, Minister of Administrative Reform Kyriakos Mitsotakis said.

Prime Minister Antonis Samaras has until February to pull together a supermajority in the national parliament to elect a new president or the anti-bailout opposition party SYRIZA will force a snap election. That would return Greek voters to their 2012 dilemma when the country’s membership of the single currency hung by a thread, Mitsotakis said in an interview.

The widening spreads left the euro struggling, with investors also wary of German inflation numbers later in the day. A year-on-year increase in German consumer prices of 0.9 percent is forecast, up from 0.8 percent in September.

“On the inflation side, euro weakness and its impact on inflation has been reduced by sharply falling commodity prices,” Morgan Stanley said in a note. The euro could come under more pressure if German inflation falls short of expectations, the MS analysts said.

On Friday, euro zone inflation data is due, and forecasts are for an annual 0.4 percent reading, up from 0.3 percent in September. The European Central Bank has been grappling with low inflation for much of this year and has lowered rates to near zero and talked the euro lower to ward off disinflation.

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 actual vs. forecast:

               Cur.                       Event     Actual    Forecast              Previous

                 AUD                    HIA New Home Sales       0.0%                    3.3%     

                 GBP                     Nationwide HPI (YoY)      9.0%      8.5%      9.4%     

                 GBP                     Nationwide HPI (MoM)   0.5%      0.3%      -0.1%    

                 GBP                     MPC Member Cunliffe                                                   

                 EUR                    Spanish GDP (QoQ)           0.5%      0.5%      0.6%     

                 EUR                    German Unemployment                -22K       5K           9K          

                 EUR                    German Unemployment                6.7%      6.7%      6.7%     

                 USD                    GDP (QoQ) (Q3)                                3.0%      4.6%     

                 USD                    GDP Price Index (QoQ)                   2.0%      2.1%     

                 USD                    Initial Jobless Claims                      283K      283K     

                 USD                    Fed Chair Yellen Speaks                                                              

 

Upcoming Economic Events that you should be monitoring:

               Cur.                       Event     Actual    Forecast              Previous

                 JPY                      Household Spending                      -4.3%     -4.7%    

                 JPY                      National Core CPI (YoY)                3.0%      3.1%     

                 JPY                      Tokyo Core CPI (YoY)                      2.5%      2.6%     

                 AUD                    PPI (YoY) (Q3)                                  2.3%     

                 AUD                    PPI (QoQ) (Q3)                                 -0.1%    

                 AUD                    Private Sector Credit                       0.4%      0.4%     

                 JPY                      BoJ Press Conference                                                    

                 EUR                    German Retail Sales                        -1.0%     2.5%     

                 EUR                    French Consumer                            -0.3%     -0.7%    

                 EUR                    Italian CPI (MoM)                            -0.2%     -0.4%    

                 EUR                    Core CPI (YoY) (Oct)                        0.8%      0.8%     

                 EUR                    CPI (YoY) (Oct)                  0.4%      0.3%     

                 EUR                    Unemployment Rate                      11.5%    11.5%   

                 USD                    Core PCE Price Index                                     1.5%     

                 CAD                    GDP (MoM) (Aug)                            0.0%      0.0%     

                 USD                    Chicago PMI (Oct)                          60.0       60.5      

                 USD                    Michigan Consumer                       86.4       86.4      

Government Bond Auction

Date Time Country Auction

Oct 30 10:10 Italy BTP/CCTeu auctions

Oct 30 17:00 US Usd 29bn 7Y Notes

Nov 03 10:00 Norway T-bill auction

Nov 04 10:15 Austria RAGB auction

Nov 04 10:30 Belgium 3 & 6M T-bill auction (Feb & Apr 2015)

Nov 04 10:30 UK Auctions 0.5% 2050 I/L Gilt

Nov 05 10:30 Germany Eur 4.0bn Oct 2019 Bobl auction

Nov 06 09:30 Spain Bono/Obligacion auction

Nov 06 10:03 Sweden I/L bond auction

Nov 06 11:00 Norway Announces details of bond auction on Nov 11

Nov 07 16:30 Italy Announces details of BOT auction on Nov