EUR/GBP Monthly Fundamental Forecast May 2014

Outlook and Recommendation

The EUR/GBP  is trading close to its average range at 0.8217 after touching a monthly high of 0.8314 as both currencies traded on strong notes. The euro area economic recovery remains on track and we have revised our growth forecasts slightly for this year and next to 1.1% and 1.4%, respectively, from 1.0% and 1.3%. However, the risk of protracted low inflation endures. Though our base case remains for unchanged interest rates through the remainder of the year, traders note the considerable possibility of a rate cut should the euro strengthen from current levels. A new targeted long-term refinancing operation is also a viable option later in the year if credit conditions do not improve.

First-quarter real GDP expanded by a robust 0.8% q/q in the U.K., in spite of a weak performance in the construction sector due to widespread flooding. Given the recent fall in inflation and upward trend in wages, signs are pointing to greater persistence in the ongoing recovery (notwithstanding the likely drag on exports from currency appreciation). Traders have raised their growth forecasts from 2.5% to 2.8% in 2014 and from 2.0% to 2.1% in 2015

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 Name – The Bank of England

Date of next meeting: May 08, 2014

Current Rate: 0.50%

Central Bank Name – European Central Bank

Date of next meeting: May 08, 2014

Current Rate: 0.25%

 

Economic events for the month of February affecting EUR, GBP and USD