Forex Market: EUR/GBP daily trading forecast

Yesterday’s trade saw EUR/GBP within the range of 0.7935-0.8006. The pair closed at 0.7943, losing 0.10% on a daily basis.

At 7:20 GMT today EUR/GBP was down 0.04% for the day to trade at 0.7939. The pair touched a daily low at 0.7937.

Fundamentals

Euro zone

Harmonized Consumer Inflation – final estimate

The annualized final consumer inflation in the Euro zone, evaluated in accordance with Eurostat’s harmonized methodology, probably confirmed the preliminary rate at 0.3% in November, which was reported on November 28th. If confirmed, this would be the lowest level of the Harmonized Index of Consumer Prices since September. In October the final HICP reading pointed to annual inflation rate of 0.4%, which matched the preliminary estimate. According to the preliminary data, among the main components of the HICP, services is expected to have the highest annual rate in November (1.1% compared to 1.2% in October), followed by food, alcohol & tobacco (0.5% or unchanged in comparison with October), non-energy industrial goods (0.0% compared to -0.1% in October) and energy (-2.5% compared to -2.0% in October).

The index shows the change in price levels of a basket of goods and services from consumer’s perspective and also reflects purchasing trends. The main components of the HICP are food, alcohol and tobacco (accounting for 19% of the total weight), energy (11%), non-energy industrial goods (29%) and services (41%).

The HICP is used to evaluate and compare inflation rates between Member States, according to Art. 121 of the Amsterdam’s Agreement and directives by the European Central Bank (ECB), in order the latter to achieve price stability and the implementation of monetary policy. The HICP aggregates are calculated as a weighted average of each member state’s HICP components.

In case the HICP slowed down more than anticipated, thus, distancing from the 2% inflation objective set by the ECB, this would mount selling pressure on the euro, because of the greater possibility of expanding the set of monetary policy measures in order to stimulate economic activity.

The annualized final Core HICP for November probably matched the preliminary core inflation estimate, which was reported at 0.7% on November 28th. In October the final annualized core inflation in the Euro area was registered also at 0.7%. This index excludes volatile categories such as food, energy, alcohol and tobacco. Eurostat is scheduled to release the final inflation data at 10:00 GMT.

United Kingdom

Bank of England Minutes

At 9:30 GMT Bank of England is to publish the minutes from its most recent meeting on policy. Released two weeks after the meeting itself, the minutes provide a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Monetary Policy Committee (MPC). On December 4th 7 members of the Committee probably voted in favor of keeping the benchmark interest rate unchanged, while 2 members probably supported a rate hike. In addition, all 9 members of the Committee probably voted to keep the stock of purchased assets financed by the issuance of central bank reserves unchanged at £375 billion. In case the central bank demonstrates a hawkish view in regard to inflation pressure and overall economic activity in the UK, this heightens the probability of an interest rate hike, which has a positive effect on the pound. A dovish view, on the other hand, will have the opposite effect.

Claimant count change, Unemployment rate by the ILO

The number of jobless claims in the United Kingdom probably dropped by 20 000 in November, marking the 26th consecutive month of declines, according to expectations, following another drop by 20 400 in October. At the same time, the claimant count rate, which represents the percentage change of jobless claims compared to the entire work force, probably fell to 2.7% in November from 2.8% during the previous month.

The rate of unemployment in the UK, estimated in accordance with ILO (International Labour Organization) standards, probably remained steady at 6.0% during the three months to October compared to the same period a year ago. If so, this would be the third consecutive period, during which the jobless rate stood at that level, and also the lowest rate since October 2008.

During the period July-September there were 30.79 million people in employment, or an increase by 112 000 compared to the period April-June and also 694 000 more compared to July-September a year earlier. There were 22.52 million people in full-time employment, or 589 000 more compared to the same period a year earlier, while 8.27 million people were working part-time during the three months to September, an increase by 105 000 compared to a year earlier. During the period July-September 1.96 million people were unemployed, or 115 000 fewer than in the period April to June and 529 000 fewer compared to July-September 2013.

In July to September there were 9.03 million people aged between 16 and 64, who were out of work and not seeking or available for employment, according to data by the Office for National Statistics (ONS). This represented an increase by 38 000 in comparison with the period April to June, but was also a fall by 16 000 compared to July-September last year.

The rate of unemployment refers to the percentage of economically active people, who are currently unemployed. According to the ILO approach, people who are considered as unemployed are either: 1) out of work, but are actively searching for employment, or 2) out of work and are waiting to be hired again during the next two weeks.

The ILO Unemployment Rate is based on a monthly survey, known as the Labour Force Survey in the United Kingdom, with approximately 40 000 individuals being interviewed every month. This indicator reflects overall economic state in the country, as there is a strong correlation between consumer spending levels and labor market conditions. Low rates of unemployment are accompanied by higher spending, which causes a favorable effect on corporate profits and also accelerates overall growth. In case the rate of unemployment fell more than projected, this would certainly have a bullish effect on the sterling. The official report by the ONS is due out at 9:30 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7961. In case EUR/GBP manages to breach the first resistance level at 0.7988, it will probably continue up to test 0.8032. In case the second key resistance is broken, the pair will probably attempt to advance to 0.8059.

If EUR/GBP manages to breach the first key support at 0.7917, it will probably continue to slide and test 0.7890. With this second key support broken, the movement to the downside will probably continue to 0.7846.

The mid-Pivot levels for today are as follows: M1 – 0.7868, M2 – 0.7904, M3 – 0.7939, M4 – 0.7975, M5 – 0.8010, M6 – 0.8046.

In weekly terms, the central pivot point is at 0.7906. The three key resistance levels are as follows: R1 – 0.7978, R2 – 0.8028, R3 – 0.8100. The three key support levels are: S1 – 0.7856, S2 – 0.7784, S3 – 0.7734.