gbp fundamentals

Euro, British Pound Remain Weak as Markets Price in ECB, BOE Rate Cuts

Monday, 20 October 2008 23:02:28 GMT  |  Terri Belkas, Currency Strategist

The euro and British pound continue to trade as “anti-dollar” currencies, and with the greenback remaining strong EUR/USD and GBP/USD have been hit hard.

While the fundamentals of the US, Euro-zone, and UK are all gloomy, the US has been perceived as being somewhat ahead of the ball in that they have been proactive in cutting interest rates and intervening in the markets. Though the Federal Reserve is anticipated to cut rates by at least 25bps on October 29, we also have to take into consideration that Credit Suisse overnight index swaps are pricing in over 100bps worth of cuts by the European Central Bank and Bank of England over the next 12 months. This leaves substantial downside risk open for both the Euro and British pound in the long-term. In the near-term, though, we turn to the technical perspective as both EUR/USD and GBP/USD are trading just above major support. As mentioned in the US dollar section, EUR/USD needs to hold above 1.3300/15 and GBP/USD must stay above 1.70-1.71 in order to avoid more substantial declines.

Related Articles: Euro Weekly Outlook, British Pound Weekly Outlook


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