Jump to content

EUR/GBP at risk as manufacturing slowdown highlights eurozone underperformance​​​​​​​​​​​​​


Recommended Posts

EUR/GBP looks at risk of further downside, with improving UK GDP coming in stark contrast to a eurozone at risk of a manufacturing-led slowdown.

bg%20euro%20pound%20eur%20gbp%20aud%20doSource: Bloomberg
 Joshua Mahony | Senior Market Analyst, London | Publication date: Wednesday 13 October 2021 

UK growth improves in August

This morning has seen a raft of data points released in the UK, with the economy largely pointing in the right direction. The GDP figure was always likely to gain particular attention, with the August figure of 0.4% bringing an improved view after a 0.1% contraction in July. As seen below, this brings the UK economy back towards the pre-pandemic levels.

UK_GDP_August_21.pngSource: Office for National Statistics

 

It is perhaps unsurprising to see much of that recovery driven by the services sector, with the lockdowns bringing particular difficulties for the UK economy.

However, that does provide the potential for a stronger outlook given difficulties evident throughout the manufacturing sector of late.

Contributions_to_UK_GDP_Aug.pngSource: Office for National Statistics

 

While issues remain for the UK economy, the lessened reliance upon the manufacturing sector does mean the recent logistical and input pricing difficulties will hit other nations more so than the UK.

Hiring does remain a key problem for many companies as we head towards the crucial festive period. However, energy and material intensive industries will be at risk given the recent troubles evident throughout China.

With that in mind, it makes sense to expect outperformance for UK growth compared with much of the eurozone. As a result, we have a notable difference between the outlook of the European Central Bank (ECB) and that of the Bank of England (BoE).

While the BoE is expected to raise rates in the second quarter (Q2) 2022, we have looked all the way to the fourth quarter (Q4) 2023 for the first hike from the ECB.

That could obviously change, yet near-term economic struggles could ensure greater hesitancy despite rising prices in the eurozone. The ING rate forecasts below highlight that disparity between ECB thinking and that of the Fed/BoE.

ING_rate_outlook_sept_21.pngSource: ING central bank

 

With the UK economy expected to outperform and the ECB rates potentially remaining unchanged for another two years, it makes sense to look for EUR/GBP weakness from here on.

The daily chart highlights how price has been consolidating above the key April support level of 0.8472. A break below that point would point towards 0.8450 as the next hurdle to overcome for bears.

However, such a move looks likely, bringing the potential for another period of weakness for the pair.

EURGBP-Daily131021.pngSource: ProRealTime

 

The four-hour chart highlights how price remains above key support for now, with today bringing yet another touch of 0.8472. That respect does highlight the potential for a rebound following recent losses.

A push up through 0.8518 would bring greater confidence of that short-term move higher. However, further losses do seem likely before long, with a break below 0.8472 bringing about a new sell signal for this pair.

EURGBP-4-hours131021.pngSource: ProRealTime
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      21,280
    • Total Posts
      90,909
    • Total Members
      41,398
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Mapiknot
    Joined 06/02/23 21:35
  • Posts

    • Look Ahead to 07/02/23: RBA; GB Retail Sales; BP, BNPP earnings Australia’s central bank is likely to deliver a fourth consecutive quarter-point interest rate hike, after further tightening by the Fed, the ECB and the BoE. Brace for UK retail, earnings from BP (BP) and BNP Paribas (BNPP). Also, look out for US trade balance figures and Halifax house price data ahead of key UK growth data out later in the week.    Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 06 February 2023        
    • Hi, I am practicing certain strategies in demo account. I have created few screeners but when i tried to buy or short sell different stocks shortlisted based on screener conditions, i am getting different kinds of errors. Some stocks you can buy but can't short-sell and so on. I searched in the forums and i understand different restrictions such as market cap should be so and so. Are these rules defined somewhere?  for e.g. one forum reply says market cap should be above 10 billion otherwise you will get second message in below list. However even i try to short sell a stock that has £30 billion market cap, i get the same error.  1. IG is not accepting opening trades on this market, you may only place an order to close. 2. Market you have requested is not longer available online Any suggestions on the above will be greatly appreciated. Thank you.
    • Charting the Markets - February 6, 2023 FTSE 100, DAX and S&P 500 tiptoe lower following strong US jobs report. EUR/USD and GBP/USD are topping out while EUR/GBP rallies. And gold, Brent crude, and natural gas head lower, as payrolls strengthen the dollar.                         This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
×
×
  • Create New...