EURGBP – Why the pair is heading lower

EURGBP hva chart showing price is heading lower
EURGBP has not been able to break above the HVA between .765 and .795.

EURGBP broke lower last night and has continue toward the lower portion of the HVA.  The UK missed its CPI and PPI numbers but the pair did not give up much of its gains which signals the bulls have run out of gas.  A lower CPI and PPI would be used to justify more easing by the BOE but the market feels this will not be happening in the near term,  otherwise EURGBP would have risen after this morning announcement.

Tomorrow will be a big day for the pair with British employment data and EU CPI data being released.

Look for a miss on EU CPI to signal more easing by the ECB.  This should push the pair toward our target of .725.

 

EURGBP Announcements

Time Cur. Event Actual Forecast Previous
Tuesday, May 17, 2016
02:30   GBP CPI (MoM) (Apr) 0.1% 0.3% 0.4%  
02:30   GBP CPI (YoY) (Apr) 0.3% 0.5% 0.5%  
02:30   GBP PPI Input (MoM) (Apr) 0.9% 1.1% 2.2%
03:00   EUR Trade Balance (Mar) 28.6B 22.5B 19.0B  
Wednesday, May 18, 2016
02:30   GBP Average Earnings Index +Bonus (Mar)   1.7% 1.8%  
02:30   GBP Claimant Count Change (Apr)   4.3K 6.7K  
02:30   GBP Unemployment Rate (Mar)   5.1% 5.1%  
03:00   EUR Core CPI (YoY) (Apr)   0.7% 0.8%  
03:00   EUR CPI (YoY) (Apr)   -0.2% -0.2%  
03:00   EUR CPI (MoM) (Apr)     1.2%

 

EURGBP Technical Analysis

At the beginning of May EURGBP tried to break out of the HVA (.7650 to .7980 formed from February to late April) but was not able to.  Its next move is to test the bottom of the range which is around .765.

EURGBP hva chart showing price is heading lower
EURGBP has not been able to break above the HVA between .765 and .795.

EURGBP Investment Bank Forecasts

We are going against the grain of the other investment banks but we think these banks have under estimated the ECB’s need to weaken the Euro and that a large Brexit premium has been put into price.

EURGBP Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
CommerczBank 0.79 0.77 0.78 0.77 0.77
HSBC 0.83 0.76 0.75              –              –
ScotiaBank 0.80 0.75 0.73 0.70 0.72
Morgan Stanley 0.81 0.81 0.80 0.80 0.80

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