The EUR/GBP was under pressure most of the session on Wednesday with investors reacting to stronger than expected housing data from the U.K. and benign
The EUR/GBP was under pressure most of the session on Wednesday with investors reacting to stronger than expected housing data from the U.K. and benign data from the Euro Zone. The Forex pair was last trading .8493, down -0.0240 or -0.28%.
The British Pound found support from traders after the release of the better-than-expected Nationwide HPI report. The data came in at 0.6%, beating the -0.1% estimate.
The price action indicates that investors were pleased with the positive outcome of the housing report since this sector was feeling the worst of the U.K.’s decision to leave the European Union. The rise in the HPI was a welcome surprise because data showed that housing market activity has slowed in recent months. New buyer inquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum.
Recent price action suggests that EUR/GBP investors may be increasing bets that the Bank of England will refrain from a rate cut and additional stimulus when it next meets on September 15. The inability to rally through the recent highs suggest that the experts may have been a little too gloomy about the outcome of Brexit.
Helping to pressure the EUR/GB P was flat economic data from the Euro Zone, despite massive amounts of stimulus from the European Central Bank. This includes the implementation of negative interest rates. Euro Zone Core CPI came in at 0.2%, slightly below the 0.3% estimate. The Euro Zone Unemployment Rate was 10.1%, in line with expectations. The low readings have investors discussing the possibility of fiscal action to stimulate the economy.
With investors reacting to the possibility the Bank of England will refrain from additional stimulus in September and Euro investors talking about fiscal stimulus, it looks as if the EUR/GBP will continue to weaken over the near-term. The only way I can see a rally by the currency pair is if the BoE comes in with new stimulus measures or cuts rates at its monetary policy meeting in mid-September.
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Today’s economic releases:
Cur. | Event | Actual | Forecast | Previous |
JPY | Industrial Production (MoM) (Jul) | 0.0% | 0.8% | 2.3% |
AUD | RBA Assist Gov Debelle Speaks | |||
AUD | HIA New Home Sales (MoM) (Jul) | -9.7% | 8.2% | |
NZD | ANZ Business Confidence (Aug) | 15.5 | 16.0 | |
AUD | Private Sector Credit (MoM) (Jul) | 0.4% | 0.4% | 0.2% |
GBP | Nationwide HPI (MoM) (Aug) | 0.6% | -0.3% | 0.5% |
GBP | Nationwide HPI (YoY) (Aug) | 5.6% | 4.8% | 5.2% |
EUR | German Retail Sales (MoM) (Jul) | -1.5% | 0.5% | -0.1% |
USD | FOMC Member Rosengren Speaks | |||
EUR | German Unemployment Change (Aug) | -7K | -5K | -7K |
EUR | German Unemployment Rate (Aug) | 6.1% | 6.1% | 6.1% |
EUR | Core CPI (YoY) (Aug) | 0.8% | 0.9% | 0.9% |
EUR | CPI (YoY) (Aug) | 0.2% | 0.3% | 0.2% |
EUR | Unemployment Rate (Jul) | 10.1% | 10.0% | 10.1% |
USD | FOMC Member Kashkari Speaks | |||
USD | ADP Nonfarm Employment Change (Aug) | 177K | 175K | 179K |
CAD | GDP (MoM) (Jun) | 0.6% | 0.4% | -0.6% |
CAD | GDP (QoQ) (Q2) | -0.4% | 0.6% | |
CAD | GDP Annualized (QoQ) (Q2) | -1.6% | -1.5% | 2.4% |
USD | Chicago PMI (Aug) | 51.5 | 54.0 | 55.8 |
USD | Pending Home Sales (MoM) (Jul) | 1.3% | 0.6% | 0.2% |
USD | Crude Oil Inventories | 2.276M | 0.921M | 2.501M |
USD | Cushing Crude Oil Inventories | -1.039M | 0.375M | |
AUD | AIG Manufacturing Index | 56.4 | ||
JPY | Capital Spending (YoY) (Q2) | 5.6% | 4.2% | |
CNY | Manufacturing PMI (Aug) | 49.9 | 49.9 | |
CNY | Non-Manufacturing PMI (Aug) | 53.9 | ||
AUD | Private New Capital Expenditure (QoQ) (Q2) | -4.2% | -5.2% | |
AUD | Retail Sales (MoM) (Jul) | 0.3% | 0.1% | |
CNY | Caixin Manufacturing PMI (Aug) | 50.1 | 50.6 | |
JPY | 10-Year JGB Auction | -0.047% |
Upcoming Economic Events that you should be monitoring:
Thursday, September 1, 2016
Cur. | Imp. | Event | Actual | Forecast | Previous |
EUR | German Manufacturing PMI (Aug) | 53.6 | 53.6 | ||
EUR | Manufacturing PMI (Aug) | 51.8 | 51.8 | ||
GBP | Manufacturing PMI (Aug) | 49.0 | 48.2 | ||
USD | Initial Jobless Claims | 265K | 261K | ||
USD | Nonfarm Productivity (QoQ) (Q2) | -0.6% | -0.5% | ||
USD | Unit Labor Costs (QoQ) (Q2) | 2.1% | 2.0% | ||
USD | Manufacturing PMI (Aug) | 52.1 | 52.1 | ||
USD | ISM Manufacturing Employment (Aug) | 49.6 | 49.4 | ||
USD | ISM Manufacturing PMI (Aug) | 52.0 | 52.6 | ||
EUR | ECB’s Nowotny Speaks | ||||
USD | FOMC Member Mester Speaks |
Government Bond Auctions
Date/Time Country Type
Aug 31 11:05 Norway Holds bond auction
Aug 31 11:30 Germany Eur 4bn Sep 2018 Schatz
Sep 01 10:30 Spain Holds bond auction
Sep 01 11:30 UK Jul 2022 Gilt
Sep 01 11:50 France Holds bond auction
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.