EUR News and Talking Points
- EUR/GBP may push higher if the ECB gives even a modest hint of ending QE.
- Data releases and a potential German coalition deal may boost the single currency.
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ECB May Keep its Powder Dry
EUR/GBP is likely to remain stuck in a range ahead of the latest European Central Bank (ECB) monetary policy announcement with investors keeping a close eye on the accompanying statement for any signals that the central bank may give on the current bond buying program (QE). The minutes from the December meeting signalled a shift from the central bank to earlier communication over QE although markets are expecting the ECB to wait and see the next staff projections in March before commenting on any bond buying/reduction timetable. The current EUR30 billion a month bond buying programme is scheduled to finish in September this year.
DailyFX analyst Chris Vecchio will be covering the ECB Rate Decision Live on Thursday, January 25 from 12:30 GMT.
German Coalition News and Data Releases Weigh Heavy
A busy economic calendar in the week ahead will also keep investors on their toes with a raft of closely watched sentiment indicators released mid-week. In addition, on Friday the latest ECB survey of professional forecasters is released, a quarterly survey of expectations for the rates of inflation, real GDP growth and unemployment in the euro area for several timeframes, together with a quantitative assessment of the uncertainty surrounding them.
Germany’s Social Democrats (SDP) voted on Sunday to enter coalition talks with Angela Merkel’s Conservatives, opening the way for the two largest political parties to form a grand coalition. The deal however was not without its detractors within the SDP, with 362 delegates voting ‘Yes’ and 279 voting ‘No’, highlighting the difficulty of the upcoming discussions. Talks will begin shortly and once/if a deal has been reached, SPD delegates will then vote on whether to approve it or not.
EUR/GBP Stuck ahead of UK GDP
The European single currency is not alone in waiting for important data releases, with GBP on edge ahead of the latest UK jobs and data release on Wednesday and the first look at Q4 GDP on Friday. Any uptick in wages will be welcomed by the Bank of England, especially after the recent fall in inflation, while the GDP release could come in anywhere 0.4% and 0.6%, as the market begins to upgrade UK growth prospects.
DailyFX analyst Martin Essex will be covering the UK Jobs and Wages data on Wednesday while I will be taking a look at the UK Q4 GDP release on Friday this week.Both webinars begin at 09:15 GMT.
A look at the daily chart shows EUR/GBP stuck in a sideways channel, and sitting on the 50% Fibonacci retracement level of the April – August 2017 move. Resistance remains around 0.8930 with support at 0.8730 ahead of Fibonacci support and the December 8, 2017 low at 0.86930.
EUR/GBP Price Chart (May, 2017 - January 22, 2018)
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
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