EUR/GBP Weekly Fundamental Analysis April 16-20, 2012, Forecast

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Updated: Jan 1, 2011, 00:00 GMT+00:00

Introduction: The cross tends to move in ranges, with relatively clear barriers. The narrower ranges made it somewhat harder, but it seems to return to

EUR/GBP Weekly Fundamental Analysis April 16-20, 2012, Forecast

Introduction: The cross tends to move in ranges, with relatively clear barriers. The narrower ranges made it somewhat harder, but it seems to return to wider ranges. The GBP is does not seem to move in response to the EUR as directly currently. The UK austerity program vs. The EU debt crisis seems to have them moving in opposing distances. They are developing new trading personalities and there is a good deal of profit to be made trading this pair. They can be volatile.

The interest rate differential between the European Bank(ECB) and the Bank of England(BoE)
European and UK economic data
Growth differentials between the Euro zone and UK

Analysis and Recommendations

The EUR/GBP fell on Friday, but for the week the euro is trading higher then Monday. The euro ended the week at 0.8252

Date	Last	Open	High	Low	Change %
04/13/2012	0.8252	0.8264	0.8268	0.8229	-0.15%
04/12/2012	0.8264	0.8239	0.8270	0.8227	0.30%
04/11/2012	0.8239	0.8246	0.8264	0.8234	-0.08%
04/10/2012	0.8247	0.8241	0.8276	0.8234	0.07%
04/09/2012	0.8241	0.8242	0.8257	0.8230	-0.01%

EUR continues to show resilience in the face of a challenged outlook, entering the NA session in the mid 1.31s. A dovish Fed has helped support EUR, even as European bond markets suggest building stresses and the Spanish IBEX has dropped to an almost four year low. Today, the Bank of Spain released their March statistics, which showed that the ECB increased its lending to Spanish banks from €152bn in February to €228bn in March, a new record. Suggesting that the banking system remains vulnerable and that if any of these loans were used to buy Spanish sovereign debt the increase in yields will be generating mark to market losses. Do not expect EUR to collapse lower, supported by a limit to how much the USD can rally without stifling the US recovery.

Credit rating agency Standard & Poor’s says Britain has retained its top-notch AAA rating, adding that it regards the country’s economic outlook is stable.

The agency said on Friday that it anticipated Britain would see “relatively modest real GDP growth of about 1.6 per cent between 2012 and 2015”.

In other European news, inflation in Germany, Italy and Spain came in as expected providing some reassurance that next week’s Eurozone CPI will be close to the flash estimate of 2.6%. European finance ministers are hosting a May 2 meeting to discuss bank capital requirements

Major Economic Events for the past week actual v. forecast

Apr. 09

CNY

Chinese CPI (YoY)

3.6%

3.3%

3.2%

Apr. 10

USD

Fed Chairman Bernanke Speaks

JPY

Interest Rate Decision

0.10%

0.10%

JPY

BoJ Press Conference

Apr. 12

CAD

Trade Balance

0.3B

2.0B

USD

Trade Balance

-46.0B

-52.0B

-52.5B

USD

Initial Jobless Claims

380K

355K

367K

Apr. 13

CNY

Chinese GDP (YoY)

8.1%

8.3%

8.9%

USD

Core CPI (MoM)

0.2%

0.2%

0.1%

Historical:

Highest: 1.2336 EUR on 29 Jun 2010.

Average: 1.1548 EUR over this period.

Lowest: 1.0686 EUR on 13 Oct 2009

Economic Highlights of the coming week that affect the Euro, GPB, and the Franc

Apr. 16