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Euro and GBP Outlook: Volatility Ahead of BoE Testimony, ZEW Data

Euro and GBP Outlook: Volatility Ahead of BoE Testimony, ZEW Data

2019-10-15 07:00:00
Dimitri Zabelin, Junior Currency Analyst

US Dollar, BoE Testimony, Euro, German ZEW Data, IMF World Outlook – Talking Points

  • Euro may fall if German ZEW data accentuates German growth fears
  • GBP cautiously eyes BoE Governor testimony amid Brexit uncertainty
  • Global growth updates from IMF, World Bank may amplify USD rise

Learn how to use political-risk analysis in your trading strategy!

The US Dollar may rise vs the Euro and British Pound against the backdrop of an uncertain environment that may place a premium on liquidity, a domain where the Greenback reigns supreme. German ZEW Survey Expectations are anticipated to show an even-more negative reading which could pressure the Euro if it shows German growth prospects are pessimistic.

Since September 2018, Eurozone economic data has been tending to underperform relative to economists’ expectations, so it would not be surprising to see German ZEW data fall in line with this broader trend. Meanwhile, BoE Governor Mark Carney will be giving a Parliamentary testimony which could spark risk aversion and pressure the British Pound if his outlook for Brexit carries gloomy undertones.

Last week, GBP spiked and erased over 20 days’ worth of gains in EUR/GBP after news broke that substantial progress had been made in resolving the issue over the Irish backstop. However, traders’ optimism is now slowly eroding as reality begins to sober them up to the bitter reality that there is “still much work to do”. GBP’s gains may therefore be partially erased if Carney’s comments exacerbate the retreat in optimism.

Adding to packed docket will also be the release of global growth outlooks by the IMF and World Bank. Markets are likely already pricing in a gloomy outlook. The question is – and this is where the source of volatility may emerge – exactly how downbeat are forecasts going to be? Follow me on Twitter @ZabelinDimitri to find out and get in-depth market analysis.

EUR/GBP Technical Analysis

EUR/GBP may attempt to enter into the 0.8786-0.8874 congestive range after it crashed through it between October 10-11 amid renewed hope for an orderly Brexit. However, traders may be anxious to commit capital against the backdrop of an unusually fundamentally-volatile environment. They may instead choose to wait until more political clarity is given and will then place their bets accordingly.

Those with long positions may wait to add exposure until the pair clear resistance at 0.8917 with follow-through, while those going short may be waiting for a break below 0.8652. However, trading based on technical patterns – especially with the docket this week – may be particularly difficult given the political environment.

Market Analysis of the Day: EUR/GBP May Aim to Re-Test Familiar Resistance Between 0.8786-0.8874

Chart showing EUR/GBP.

EUR/GBP charted created using TradingView


--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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