EUR/GBP Fundamental Forecast – July 28, 2016

The EUR/GBP finished at .8391, up 0.0025 or +0.30%. Volume and volatility were light. Wednesday’s price action continued the sideways trend that has been in place since July 14. This suggests investor indecision and impending volatility.

We could see a bias to the upside develop over the near-term. Recently the Bank of England strongly suggested that it would likely cut interest rates at its next meeting on August 4. Although the interest rate differential favors the British Pound over the Euro, this rate cut would bring interest rates to 25 basis points, just one more rate cut to zero and two more rate cuts to negative. The bearish trend could pressure the British Pound over the near-term.

Earlier in the session, the U.K.’s Office for National Statistics (ONS) reported the U.K. economy grew by 0.6 percent in the second quarter of the year, quarter-on-quarter, according to the first official estimate out since the country voted to leave the European Union.

The news surprised traders because it shows the economy accelerated heading into the EU referendum. However, it wasn’t strong enough to produce a rally since the main focus for traders is on the possible rate cut by the BoE next week.

Phillip Hammond, the new finance minister, reiterated on Wednesday that both the government and the central bank would take “whatever action is necessary to support our economy,” according to Reuters.

Also on Wednesday, the U.K. Trade Union Congress reported that British workers has suffered a steep fall in real wages equaled only be Greece among members of the Organization for Economic Co-operation and Development.

Pressure could continue on the EUR/GBP on Wednesday with the possibility of an eventual acceleration to the downside if traders decide to aggressively sell the British Pound in anticipation of the BoE rate cut next week.

FxEmpire provides in-depth analysis for each asset 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, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

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Thursday, July 28, 2016

Government Bond Auctions

Date/Time Country Type

Jul 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Jul 28 11:10 Italy Holds bond auction