EUR/GBP Monthly Fundamental Forecast December 2012

Outlook and Recommendation

The EUR/GBP traded in the midpoint of its monthly range closing at 0.8109. The UK had some positive data releases including GDP meeting forecast which surprised investors, but economy remains suspect along with their AAA rating. The euro was weak but after the Finance Ministers came to terms with Greece, market sentiment turned positive.

The latest agreement between Greece, the Eurogroup and the IMF will restore official funding to Greece in the short-term, alleviating the near-term threat of a currency union exit. The better-than-anticipated GDP results, the Greek deal and the approval of Spain’s official request for bank aid (worth €39.5 billion) helped bring peripheral bond yields down in November, with the euro also gaining lost ground. Critical risks remain, however, such as a sharper recession in the program states (rendering them unable to meet the terms of their bailout agreements), a more prolonged global slowdown (removing the sole growth driver for much of the euro area), and upcoming elections in Italy and Germany (which could see a rollback in fiscal consolidation and support for regional integration, respectively). Possible further monetary accommodation is contingent on these downside risks. 

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.

Central Bank – The Bank of England

Date of next meeting or last meeting: December 6, 2012

Current Rate: 0.50%

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD