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    EUR/GBP: close to important levels on 12.02.2016

    Although the level of industrial production and GDP growth in the UK has reduced (0.4% in January, as per NIESR, which is published prior to the release of the official data on GDP), trade balance in the country has grown in December.
    At the same time, in Eurozone foreign trade balance has dropped, due to sharp rise in Euro in the past 2.5 months. In Germany exports in December fell by 1.6%. Imports also fell, indicating reduction in the domestic consumption. Total decline in the foreign trade balance in Germany amounted to 1.7 billion Euro in December compared to a previous month.
    Expensive Euro and declining commodity prices prevents the rise of inflation in Eurozone, making producers lower selling prices, which eventually have a negative impact on the rise of wages and retail sales.
    Situation in the UK is difficult too. Industrial production in December fell by 0.2% and by 1.7% on annual basis.
    Outcome of the last meeting of the Bank of England showed that executives of the bank worry about future economic development. Forecast of economic growth for 2016 and 2017 has been lowered to 2.2% and 2.4% respectively. The rise in the interest rate and consequently stable growth in the price of Pound can be expected not earlier than mid 2017.
    While the Bank of England considers a possibility of the increase in interest rate, ECB is aimed at further easing of the monetary policy in Eurozone. Back in January, the head of ECB Mario Draghi said that at the meeting in March ECB will revalue and revise its monetary policy.
    Therefore, we can see difference in the monetary policies of Eurozone and Great Britain.
    As a result of sales in the stock markets since the beginning of the year, Euro has grown and the price of the EUR/GBP has also in increased.
    The pair EUR/GBP is overbought, and it has reached important resistance levels on the weekly and monthly charts. As soon as markets fluctuation, caused by 2-day speech by Janet Yellen, decreases, market participants will be preparing for the meeting of ECB on 10th March. In anticipation of the drastic measures from ECB, European stock indices as well as Euro will undergo correction. It is also possible that the pair EUR/GBP will start to decline and may even go back to the downtrend.


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