Yesterday’s trade saw EUR/GBP within the range of 0.7374-0.7429. The pair closed at 0.7390, down 0.14% on a daily basis, which marked a third consecutive daily loss.
At 7:16 GMT today EUR/GBP was up 0.03% for the day to trade at 0.7392. The pair touched a daily high at 0.7395 during early Asian trade.
Fundamentals
Euro area
Economic Sentiment by the ZEW
The gauge of economic sentiment in Germany probably improved to 55.0 in February, according to the median forecast by experts, from 48.4 in January. If so, this would be the highest index reading since February 2014, when it was reported at 55.7.
In October last year the index entered into negative territory for the first time since November 2012, slipping to -3.6.
The ZEW (Zentrum für Europäische Wirtschaftsforschung) economic expectations index is published on a monthly basis. The study encompasses up to 350 financial and economic analysts. The indicator reflects the difference between the share of analysts, that are optimistic and those, that are pessimistic about the expected economic development in Germany over the next six months. A positive value indicates that the proportion of optimists is larger than that of pessimists. A ZEW reading of -100 suggests that all analysts are pessimistic about the current developments and expect economic conditions to deteriorate. A ZEW reading of 100 implies that all analysts are optimistic about the current situation and expect conditions to improve. A ZEW reading of 0 indicates neutrality.
The index of current assessment in Germany probably rose to a value of 30.0 in February from 22.4 in the prior month. If so, this would be the highest level since August 2014, when a value of 44.3 was reported.
The ZEW Economic Sentiment index for the whole Euro zone probably continued gaining ground in February, reaching 52.0. If so, this would be the highest level since June 2014, when the indicator came in at 58.4. In January the index stood at 45.2.
In case the gauge of economic sentiment exceeded expectations, this would certainly have a positive impact on the common currency. The official data is scheduled to be released at 10:00 GMT.
Greek debt negotiations break down
Yesterday Greece rejected a proposal to request a six-month extension of the international bailout package, considering it as “unacceptable”. The country was given time until Friday to request an extension, or the bailout would expire at the end of February.
“I have no doubt that, within the next 48 hours Europe, is going to come together and we shall find the phrasing that is necessary so that we can submit it and move on to do the real work that is necessary,” Greek Finance Minister Yanis Varoufakis said during a news conference, cited by Reuters.
United Kingdom
Consumer inflation
The cost of living in the United Kingdom probably continued to tumble in January, with the annual rate of inflation slowing down to 0.3%, according to the median estimate by experts, from 0.5% in December. If so, this would be the 13th consecutive month, when the annualized Consumer Price Index remained below the 2-percent objective, set by the Bank of England. Decembers rate of inflation has been the lowest since May 2000, as prices of fuel and food decreased.
In December prices of food and non-alcoholic beverages marked the largest decrease, or 1.7% year-on-year, followed by cost of transport (a 1.4% annual decrease). Downward pressure also came from categories such as miscellaneous goods and services (-0.6% year-on-year) and clothing and footwear (-0.3% year-on-year). On the other hand, cost of education went up 10% in December, prices of housing, water, electricity and gas rose 1%, while costs of communication were up 0.7%, according to the report by the Office for National Statistics.
The CPI is the main measure of inflation in the UK for macroeconomic purposes and forms the basis of the inflation target set by the government. Every month about 120 000 samples are made, examining the change in prices of about 650 products. They represent the “market basket” of goods and services, on which the index is based.
Key categories in the consumer price index are Transport (accounting for 16.2% of the total weight) and Housing, Water, Electricity, Gas and Other fuels with a 14.4% share. Recreation and Culture accounts for 13.4%, Restaurants and Hotels – 11.4% and Food and Non-alcoholic Beverages – 11.2%. The CPI also encompasses Miscellaneous Goods and Services (9.6%), Clothing and Footwear (6.5%), Furniture, Household Equipment and Maintenance (6.1%). Alcoholic Beverages and Tobacco, Health, Communication and Education comprise the remaining 11.2% of the total weight.
The annualized core consumer price inflation probably remained steady at 1.3% in January. If so, this would mark the seventh consecutive month, during which core inflation stood below the 2% target. In November consumer prices rose at an annual rate of 1.2%, which has been the lowest since December 2008, when the annual core inflation was registered at 1.1%. The core CPI measures the change in prices of goods and services purchased by consumers, without taking into account volatile components such as food, energy products, alcohol and tobacco.
In case the annual CPI slowed down more than expected, thus, further distancing from the inflation objective of 2.0%, this would certainly reduce the appeal of the sterling. The Office for National Statistics (ONS) will publish the official CPI report at 9:30 GMT.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 0.7398. In case EUR/GBP manages to breach the first resistance level at 0.7421, it will probably continue up to test 0.7453. In case the second key resistance is broken, the pair will probably attempt to advance to 0.7476.
If EUR/GBP manages to breach the first key support at 0.7366, it will probably continue to slide and test 0.7343. With this second key support broken, the movement to the downside will probably continue to 0.7311.
The mid-Pivot levels for today are as follows: M1 – 0.7327, M2 – 0.7355, M3 – 0.7382, M4 – 0.7410, M5 – 0.7437, M6 – 0.7465.
In weekly terms, the central pivot point is at 0.7408. The three key resistance levels are as follows: R1 – 0.7446, R2 – 0.7500, R3 – 0.7538. The three key support levels are: S1 – 0.7354, S2 – 0.7316, S3 – 0.7262.
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