EUR/GBP Monthly Fundamental Forecast – July 2015

Outlook and Recommendation

The EUR/GBP moved into July at the 0.71 price easing most of the month as the euro continued to decline on Greek drama. The pound soared most of the month but ended the month a bit down as traders worried about contagion from the Eurozone.  GBP outperformed in June, its 3% gain driven by a sizeable shift in yield differentials on the back of a modest improvement in the domestic outlook. The swift rally in GBP was not confirmed by momentum indicators, as both the MACD and RSI exhibited negative divergence to the rise in spot.

The aggressive rally in the British pound (GBP) has shown signs of moderation, a trend we expect to continue into year-end as the Fed moves toward hiking short-term rates. Increasingly hawkish rhetoric is pulling forward expectations of a ‘sooner’ hike by the Bank of England, a development that we believe to be somewhat premature.

The euro fell as attention shifted to strong U.S. data and the prospect for a Federal Reserve rate hike this year, after Greece’s Prime Minister signaled he would accept creditors’ bailout offer with some conditions. Greek Prime Minister Alexis Tsipras told international creditors Athens could accept their bailout offer if some conditions were changed, but Germany said it could not negotiate while Greece was headed for a referendum on the aid-for-reforms deal.

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.

 

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