GBP/EUR Weekly Outlook & Brexit Report 8th to the 12th July, 2019.

Good afternoon everyone.

 

This month the 160,000 Tory members will vote on who they want to be the next Prime Minister and the verdict will be announced on the 23rd July.  If the polls are correct and Boris takes over at No. 10, the chances of crashing out of the EU without a deal increases (some analysts are suggesting we’re seeing this partly priced into Sterling exchange rates already), therefore there is an expectation the GBP/EUR exchange rate will face further downward pressure. However if Jeremy Hunt manages to beat the odds and win, the  GBP/EUR rate could recover some of the losses it has seen over the last 8 weeks. Overall it is a tricky period to predict exchange rates and it does look like rates will remain fairly range bound (€1.1130’s - €1.1230’s) over the coming week.

 

Due to a combination of no-deal Brexit fears, as well as last week’s UK PMI stats coming in well below expectations, fears that Britain’s economy could contract in Q2 and maybe Q3 as well could lead the Bank of England (BoE) to an interest rate cut. However, the bank has continued to indicate that rate hikes are more likely than cuts over the coming years, but analysts have expressed doubt due to the recent poor UK data and rate cut bets have risen as a result. Sterling continues to trend relatively close to its worst levels in months against the Euro despite the Euro’s own weakness last week. This is because markets simply have very little or no reason to buy the Pound yet! Any positive gains in the GBP/EUR exchange rate seems to be coming from weakness in the Euro rather than Sterling strength.

 

The Week Ahead

For Sterling, once again the main driver of the GBP/EUR exchange rate this week will be politics and economic data. Wednesday will bring the most attention with a blockbuster day in terms of economic data due for release. Industrial and manufacturing production data is due along with UK GDP growth and Trade Balance data. The main release for the Euro in the coming week will most probably be the release of the minutes from the June European Central Bank (ECB) meeting which will be scrutinised for signs of what the ECB’s future policies are likely to be. Analysts will mostly be looking for signs that more members of the ECB governing council are calling for an increase in monetary policy stimulus. If so, then the Euro could weaken. The other main data release for the Euro is industrial production both in Germany and then for the whole of the Eurozone, on Friday.

GBP & EUR Weekly Movements

Market sentiment for the GBP/EUR rate is on a sideway trend at time of writing. Keys levels to keep an eye out for will be the €1.1130’s If we see the rate move LOWER than this for a sustained amount of time, then the likelihood of the rate moving into the €1.10’s will be high. As always we could easily see an upward move in the GBP/EUR exchange rate and if we do then we can expect a move towards the high €1.1170’s/80’s and possibly back in the €1.12’s. Based on the last 2 weeks’ worth of movements I’m expecting some strong resistance for the rate to move back into the €1.12’s but this weeks data has the potential to do it.

Low Risk takers with pending exchanges that need to be made this WEEK, should consider making their exchange while the interbank rate is above or close to the €1.11’s - €1.1170’s  The GBP/EUR exchange rate looks like it will continue to struggle to break this current downward/sideward trend without the help of BoE or economic data due later this week. However this economic data will now need to really impress the market to see any meaningful moves higher.

Medium Risk takers with pending exchanges that need to be made this WEEK, could hold off to see how the data comes out on Wednesday. Seen as the GBP/EUR rate has yet to drop into the €1.10’s I believe  there is good reason to hold on to see how the data comes out on Wednesday.

High Risk takers with pending exchanges that need to be made this WEEK, same as Medium Risk takers and also could take a look the Fridays data for any added boost.

 

Wednesday, 10th July, 2019

09:30 GBP Monthly Gross Domestic Product (MAY)

09:30 GBP Industrial Production (MAY)

09:30 GBP Manufacturing Production (MAY)

09:30 GBP Construction Output (MAY)

09:30 GBP Visible Trade Balance (MAY)

09:30 GBP Trade Balance Non EU GBP/Mn (MAY)

00:01 GBP RICS House Price Balance (JUN)

Thursday, 11th July, 2019

07:00 EUR German Consumer Price Index (JUN F)

10:30 GBP BOE publishes Financial Stability Report.

12:30 EUR ECB Publishes Account of June 5-6 Policy Meeting (JUN)

Friday, 12th July, 2019

10:00 EUR Euro-Zone Industrial Production (MAY)

 

GBP/EUR Daily Performance

  • High of the day so far is €1.1167
  • Low of the day so far is €1.1145
  • Resistance at €1.1130’s
  • Support at €1.1180’s
  • Daily Trading Range €1.1080’s - €1.1180’s

 

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