EUR/GBP Weekly Fundamental Analysis, October 6 – October 10, 2014 Forecast

The EUR/GBP posted a gain on the weekly chart for the first time in three weeks. Buyers came in to support the Forex pair as it approached the July 2012 bottom at .7754. It may have been a combination of profit-taking, short-covering and aggressive counter-trend buying that produced the reversal to the upside.

Sellers hit the British Pound last week after Bank of England policymaker Ben Broadbent said the recovery may not be strong enough to warrant higher rates. Additional negative news came in the form of reports showing British services and manufacturing growth losing momentum. House prices also declined.

The Euro firmed against the Sterling, following the European Central Bank monetary policy announcement on October 2. The fact that the ECB did not suggest that any type of quantitative easing program was on the horizon was the primary reason behind the mild strength.

In his post-meeting press conference, ECB President Mario Draghi emphasized that the central bank’s main goal is to maintain the inflation rate at nearly 2 percent and that the ECB’s balance sheet is simply an instrument.

Traders had initially priced in additional quantitative easing, but Draghi stated that the ECB would continue with its current policies aimed at expanding credit.

Doubts about U.K. monetary policy and oversold conditions could help the EUR/GBP rally this week. Traders will get more clarity about the state of the economy and the timing of the expected rate hike by the central bank when the Bank of England policymakers meet on Thursday, October 9.

High Impact Economic Events That Traders Should Be Aware Of This Coming Week

Currency         Event                                                                      Forecast                           Previous

Monday, October 6

There are on high impact economic events today.

Tuesday, October 7

GBP                 Manufacturing Production m/m                         0.2%                                   0.3%

Wednesday, October 8         

There are on high impact economic events today.

Thursday, October 9

GBP                Asset Purchase Facility                                           375B                                 375B

GBP                Official Bank Rate                                                    0.50%                               0.50%

GBP                MPC Rate Statement

EUR                ECB President Draghi Speaks

Friday, October 10

There are on high impact economic events today.