EUR/GBP losing streak not over yet

The start of a new trading month will bring with it the usual flurry of economic releases but there’s not all that much that stands out of note on the calendar for today. The disappointing figures from Australia serve up another alarm bell over the RBA’s recent bullish calls about the economic outlook for the country, whilst whether the pound can sustain its run higher will also be under review with today’s PMI data. The next couple of weeks do however seem to offer some degree of respite from turbulence on the political agenda, although with French elections looming, the risk this poses will never be far away.

The Traders’ View

Our prop desk has been buying up some long EUR/USD positions in the last few hours, whilst there’s also another move afoot to line up some short exposure to the S&P index. Long USD/CHF positions remain in play and profitable, but an ill-timed AUD/JPY long ahead placed ahead of the Australian data is proving costly.

Fundamental Analysis – EUR/GBP losing streak not over yet


March was categorised by some modest losses for EUR/GBP with the pair retreating by 300 points over the month. In the last few days, the ECB’s dovish tone, combined with some generally better than expected UK economic data has been driving support, with EUR/GBP managing a brief spell below 0.8500 over the weekend break. There has however been something of a reversion during the Asian session and the UK PMI figure due for release at 8.30am GMT is very much in focus. A lukewarm reading here – even if it’s fractionally above the break even 50 level – would probably be sufficient to keep the pair trading above this psychological level in the short term, although other Eurozone prints are also on the slate this morning, including both unemployment and PPI readings at 10am GMT. Even if the UK data isn’t all that great, upside could be limited by the picture emerging from the continent.

The Aussie dollar slumped during the Asian session after retail sales figures dipped into negative territory and despite rampant house price growth. The timing here is significant as the RBA will announce their latest interest rate position at 4.30am GMT tomorrow – there’s no expectation that the headline rate will change, but it could lead to some jawboning over the possibility of some kind of stimulus measures, especially depending what the Q1 inflation data looks like when that’s released towards the end of the month.

After last week’s respite, oil prices are trending lower once again with Friday’s Baker Hughes rig count showing another uptick in the number of producing wells in the US. Front month US crude remains above $50/barrel for now, but maintaining this psychological level could prove challenging. It’s going to require some fresh impetus which that’s likely to be thin on the ground ahead of Wednesday’s weekly inventory release, whilst there’s growing disquiet that some of the producing nations who cut output will start to edge back in rather than blindly giving so much share to US shale producers.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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