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Eur-gbp

EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE In recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank hiking rates by 50bsp at their July meeting. But the bank quelled any hawkish excitement by explaining they are frontloading hikes and not signalling a higher terminal rate with their bigger hike. At their July meeting the bank also failed to ease spread fragmentation concerns with their new Transmission Protection Instrument (TPI) as the eligibility criteria means countries that will need the support the most might have a tough time qualifying. Combined with Italian political concerns, further spread widening looks likely right now. Right now, even though policy and spreads are important, the main story and driver for the EUR is the economic outlook. Recent growth data continues to surprise to the downside at a rapid pace further stoking recession fears for the Eurozone. As long as data surprises lower and spreads remain high the bias for the EUR remains firmly in bearish territory. POSSIBLE BULLISH SURPRISES Geopolitics remains important where any de-escalation or cease fire in Ukraine would open up a lot of EUR upside. Also keep Italian politics in mind where successful attemptsto avoid a snap election could ease spread widening & support the EUR. Stagflation fears are high, with growth expected to slow with inflation still. Recent PMI data has invigorated recession fears, which means any materially better-than-expected growth data (German Ifo & EU GDP data this week) could spark some relief. Spread fragmentation remains a concern, especially with Italian politics and the ECB’s failed attempt to reassure markets about their new TPI tool. Any comments about TPI that convinces markets it can solve fragmentation issues should be supportive for the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 flows, if Russia increases gas flows to more regular levels it should ease some energy supply issues. POSSIBLE BEARISH SURPRISES Geopolitics remain in focus, any escalation in the Ukraine war that risks including NATO would be big negative risks. Also keep Italian politics in mind, where any failed attempts to avoid a snap election should add further pressure on the EUR. Growth concerns continue to weigh on the EUR and means any major negative surprises in incoming growth data (German Ifo & EU GDP data this week) could trigger further downside. Spread fragmentation remains in focus, and if the ECB fails to act with big jolts higher in the BTP/ Bund spread it could trigger bearish reactions in the EUR. We've seen a chunky repricing in hike expectations over the past three weeks, and any further lower repricing is expected to weigh on the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 flows, if Russia decreases gas flows again it should ease some energy supply issues. BIGGER PICTURE The fundamental outlook remains bearish for the EUR with recent leading indicators pointing to a much faster economic slowdown than markets had previously expected. The current bearish drivers (geopolitics, stagflation, spread fragmentation, energy supply concerns) far outweigh the positives from a hawkish ECB. Recession risks open up a narrative change for the EUR which will require markets to change their forecasts to reflect higher recession probabilities which should weigh on the EUR. GBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. The price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower is very risky right now. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data could trigger strong bullish reactions. The UK is facing a huge cost-of-living squeeze, which means lower-than-expected inflation could counterintuitively be a positive driver (as lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. Any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in could trigger bullish reactions. POSSIBLE BEARISH SURPRISES Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI could trigger bearish reactions. Politicsremain a focus, where any attempts by a new PM in the weeks or months ahead to call for a snap election should cause unnecessary uncertainty and could trigger GBP downside. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. Any overly dovish comments signalling less aggressive policy than what markets are currently pricing in (see Rate Tracker for STIR expectations) could trigger bearish GBP reactions. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured, alongside expectations that the BoE might not be too far away from pausing their hiking cycle. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Sterling has been looking stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion, and also means the risk to reward favours short-term upside on strong bullish catalysts.
by thunderpips
1
Bears are in control on EURGBPEURGBP - Intraday - We look to Sell at 0.8440 (stop at 0.8475) Although the bears are in control, the stalling negative momentum indicates a turnaround is possible. A Doji style candle has been posted from the base. A higher correction is expected. The bias is still for higher levels and we look for any dips to be limited. We therefore, prefer to fade into the rally with a tight stop in anticipation of a move back lower. Our profit targets will be 0.8345 and 0.8325 Resistance: 0.8460 / 0.8600 / 0.8720 Support: 0.8325 / 0.8200 / 0.8060 Risk Disclaimer The trade ideas beyond this page are for informational purposes only and do not constitute investment advice or a solicitation to trade. This information is provided by Signal Centre, a third-party unaffiliated with OANDA, and is intended for general circulation only. OANDA does not guarantee the accuracy of this information and assumes no responsibilities for the information provided by the third party. The information does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. You accept that you assume all risks in independently viewing the contents and selecting a chosen strategy. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, Oanda Asia Pacific Pte Ltd (“OAP“) accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore customers should contact OAP at 6579 8289 for matters arising from, or in connection with, the information/research distributed.'
Short
by OANDA
Fading rallies in EURGBPEURGBP - Intraday - We look to Sell at 0.8475 (stop at 0.8505) Although the bears are in control, the stalling negative momentum indicates a turnaround is possible. A higher correction is expected. The bias is still for lower levels and we look for any gains to be limited. We therefore, prefer to fade into the rally with a tight stop in anticipation of a move back lower. Our profit targets will be 0.8390 and 0.8325 Resistance: 0.8460 / 0.8600 / 0.8720 Support: 0.8325 / 0.8200 / 0.8060 Risk Disclaimer The trade ideas beyond this page are for informational purposes only and do not constitute investment advice or a solicitation to trade. This information is provided by Signal Centre, a third-party unaffiliated with OANDA, and is intended for general circulation only. OANDA does not guarantee the accuracy of this information and assumes no responsibilities for the information provided by the third party. The information does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. You accept that you assume all risks in independently viewing the contents and selecting a chosen strategy. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, Oanda Asia Pacific Pte Ltd (“OAP“) accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore customers should contact OAP at 6579 8289 for matters arising from, or in connection with, the information/research distributed.'
Short
by OANDA
1
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE In recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank hiking rates by 50bsp at their July meeting. But the bank quelled any hawkish excitement by explaining they are frontloading hikes and not signalling a higher terminal rate with their bigger hike. At their July meeting the bank also failed to ease spread fragmentation concerns with their new Transmission Protection Instrument (TPI) as the eligibility criteria means countries that will need the support the most might have a tough time qualifying. Combined with Italian political concerns, further spread widening looks likely right now. Right now, even though policy and spreads are important, the main story and driver for the EUR is the economic outlook. Recent growth data continues to surprise to the downside at a rapid pace further stoking recession fears for the Eurozone. As long as data surprises lower and spreads remain high the bias for the EUR remains firmly in bearish territory. POSSIBLE BULLISH SURPRISES Geopolitics remains important where any de-escalation or cease fire in Ukraine would open up a lot of EUR upside. Also keep Italian politics in mind where successful attemptsto avoid a snap election could ease spread widening & support the EUR. Stagflation fears are high, with growth expected to slow with inflation still. Recent PMI data has invigorated recession fears, which means any materially better-than-expected growth data (German Ifo & EU GDP data this week) could spark some relief. Spread fragmentation remains a concern, especially with Italian politics and the ECB’s failed attempt to reassure markets about their new TPI tool. Any comments about TPI that convinces markets it can solve fragmentation issues should be supportive for the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 flows, if Russia increases gas flows to more regular levels it should ease some energy supply issues. POSSIBLE BEARISH SURPRISES Geopolitics remain in focus, any escalation in the Ukraine war that risks including NATO would be big negative risks. Also keep Italian politics in mind, where any failed attempts to avoid a snap election should add further pressure on the EUR. Growth concerns continue to weigh on the EUR and means any major negative surprises in incoming growth data (German Ifo & EU GDP data this week) could trigger further downside. Spread fragmentation remains in focus, and if the ECB fails to act with big jolts higher in the BTP/ Bund spread it could trigger bearish reactions in the EUR. We've seen a chunky repricing in hike expectations over the past three weeks, and any further lower repricing is expected to weigh on the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 flows, if Russia decreases gas flows again it should ease some energy supply issues. BIGGER PICTURE The fundamental outlook remains bearish for the EUR with recent leading indicators pointing to a much faster economic slowdown than markets had previously expected. The current bearish drivers (geopolitics, stagflation, spread fragmentation, energy supply concerns) far outweigh the positives from a hawkish ECB. Recession risks open up a narrative change for the EUR which will require markets to change their forecasts to reflect higher recession probabilities which should weigh on the EUR. GBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. The price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower is very risky right now. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data could trigger strong bullish reactions. The UK is facing a huge cost-of-living squeeze, which means lower-than-expected inflation could counterintuitively be a positive driver (as lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. Any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in could trigger bullish reactions. POSSIBLE BEARISH SURPRISES Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI could trigger bearish reactions. Politicsremain a focus, where any attempts by a new PM in the weeks or months ahead to call for a snap election should cause unnecessary uncertainty and could trigger GBP downside. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. Any overly dovish comments signalling less aggressive policy than what markets are currently pricing in (see Rate Tracker for STIR expectations) could trigger bearish GBP reactions. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured, alongside expectations that the BoE might not be too far away from pausing their hiking cycle. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Sterling has been looking stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion, and also means the risk to reward favours short-term upside on strong bullish catalysts.
by thunderpips
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE In recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank confirming at least a 25bsp hike for July and possibility of a 50bsp hike in September. Despite the hawkish policy shift, the concerns over fragmentation in bond spreads (BTP\Bund) as well as fears of growing stagflation risks has seen the EUR struggle to hold onto any hawkish ECB momentum. The ECB did try to comfort spread concerns with promises of a new fragmentation tool, and even though it has kept spreads from widening further, concerns remain. If the bank can convince markets that their new spread tool(s) can stop fragmentation it should be supportive for the EUR. However, with a material energy crisis facing the EZ due to the war in Ukraine, the economic prospects look bleak. Even though growth data was surprisingly resilient in Q2, fresh recession fears ramped up as recent forward-looking growth data surprised materially lower for key members like Germany and France. Based on the forward-looking signals from leading indicators we think recession is likely in the EZ and that the narrative has turned more bearish for the EUR until that improves. POSSIBLE BULLISH SURPRISES Geopolitics remains a focus, and any possible de-escalation or cease fire in Ukraine would open up a lot of EUR upside. Also keep Italian politics in mind where any successful attempt by PM Draghi to stay in power should ease spread concerns. Stagflation fears are high, with growth expected to slow while inflation stays high. Recent PMI data has invigorated recession fears, which means any materially better-than-expected growth data (Flash PMIs this week) could spark upside. Even though the ECB’s recent communication has been enough to push BTP/ Bund spreads from their recent highs the concerns remain, especially with Italian politics further exacerbating the problem. Thus, any insights or clarity regarding their new tool that convinces markets it can solve fragmentation should be supportive for the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 pipeline closely, if Russia resumes gas flows after maintenance ends this week it could see EUR upside. POSSIBLE BEARISH SURPRISES Geopolitics remain in focus, any escalation in the Ukraine war that risks including NATO would be big negative risks. Also keep Italian politics in mind, where any triggers of general elections risk further spread concerns & pressure the EUR. Spread fragmentation remains in focus, and if the ECB fail to calm fears or even walks back on recent hawkish comments it could trigger bearish reactions in the EUR. Growth concerns continue weighing on the EUR and means incoming growth data (Flash PMIs this week) will be in focus, where any major negative surprises could trigger downside. We've seen a chunky repricing in hike expectations over the past three weeks, and any further lower repricing is expected to weigh on the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 pipeline closely, if Russia keeps gas flows closed after maintenance ends this week it could see EUR downside. BIGGER PICTURE The fundamental outlook for the EUR has shifted to bearish with recent leading indicators pointing to a much faster economic slowdown than markets had previously expected. There are bearish and bullish factors in play right now though. On the bearish side we have geopolitics, stagflation, spread fragmentation and energy concerns acting as negative drivers. But we also have hawkish ECB policy as a possible supportive driver. Recession risks does open up a narrative change for the EUR which will require markets to change their forecasts to reflect higher recession risks which should continue to weigh on the EUR. GBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. The price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower is very risky right now. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data could trigger strong bullish reactions. The UK is facing a huge cost-of-living squeeze, which means lower-than-expected inflation could counterintuitively be a positive driver (as lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. Any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in could trigger bullish reactions. POSSIBLE BEARISH SURPRISES Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI could trigger bearish reactions. Politicsremain a focus, where any attempts by a new PM in the weeks or months ahead to call for a snap election should cause unnecessary uncertainty and could trigger GBP downside. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. Any overly dovish comments signalling less aggressive policy than what markets are currently pricing in could trigger bearish GBP reactions. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured, alongside expectations that the BoE might not be too far away from pausing their hiking cycle. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Positioning has been looking stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion, and also means the risk to reward favours short-term upside on strong bullish catalysts.
by thunderpips
Short term sentiment remains negative for EURGBPEURGBP - Intraday - We look to Sell at 0.8550 (stop at 0.8580) Although the bulls are in control, the stalling positive momentum indicates a turnaround is possible. The 200 day moving average should provide resistance at 0.8553. This is negative for short term sentiment and we look to set shorts at good risk/reward levels for a further correction lower. The hourly chart technicals suggests further upside before the downtrend returns. We therefore, prefer to fade into the rally with a tight stop in anticipation of a move back lower. Our profit targets will be 0.8460 and 0.8400 Resistance: 0.8600 / 0.8720 / 0.8845 Support: 0.8460 / 0.8400 / 0.8325 Risk Disclaimer The trade ideas beyond this page are for informational purposes only and do not constitute investment advice or a solicitation to trade. This information is provided by Signal Centre, a third-party unaffiliated with OANDA, and is intended for general circulation only. OANDA does not guarantee the accuracy of this information and assumes no responsibilities for the information provided by the third party. The information does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. You accept that you assume all risks in independently viewing the contents and selecting a chosen strategy. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, Oanda Asia Pacific Pte Ltd (“OAP“) accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore customers should contact OAP at 6579 8289 for matters arising from, or in connection with, the information/research distributed.'
Short
by OANDA
EUR/GBP Trendline Breakout Might Have Been a False OneEUR/GBP broke under a near-term rising trendline from April back in early July. While the Euro weakened after the breakout, it seems that the single currency is trying to make a comeback. Prices were unable to break under the 100-day Simple Moving Average. This means the Golden Cross with the 50-day line is still in play. Breaking above the 50-day line from here could be a hint that further gains may come. Such an outcome would place the focus on highs from June. Otherwise, further losses would place the focus on lows from April.
by QM_Dubrovsky
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE In recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank confirming at least a 25bsp hike for July and possibility of a 50bsp hike in September. Despite the hawkish policy shift, the concerns over fragmentation in bond spreads (BTP\Bund) as well as fears of growing stagflation risks has seen the EUR struggle to hold onto any hawkish ECB momentum. The ECB did try to comfort spread concerns with promises of a new fragmentation tool, and even though it has kept spreads from widening further, concerns remain. If the bank can convince markets that their new spread tool(s) can stop fragmentation it should be supportive for the EUR. However, with a material energy crisis facing the EZ due to the war in Ukraine, the economic prospects look bleak. Even though growth data was surprisingly resilient in Q2, fresh recession fears ramped up as recent forward-looking growth data surprised materially lower for key members like Germany and France. Based on the forward-looking signals from leading indicators we think recession is likely in the EZ and that the narrative has turned more bearish for the EUR until that improves. POSSIBLE BULLISH SURPRISES Geopolitics remains a focus, and any possible de-escalation or cease fire in Ukraine would open up a lot of EUR upside. Also keep Italian politics in mind where any successful attempt by PM Draghi to stay in power should ease spread concerns. Stagflation fears are high, with growth expected to slow while inflation stays high. Recent PMI data has invigorated recession fears, which means any materially better-than-expected growth data (Flash PMIs this week) could spark upside. Even though the ECB’s recent communication has been enough to push BTP/ Bund spreads from their recent highs the concerns remain, especially with Italian politics further exacerbating the problem. Thus, any insights or clarity regarding their new tool that convinces markets it can solve fragmentation should be supportive for the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 pipeline closely, if Russia resumes gas flows after maintenance ends this week it could see EUR upside. POSSIBLE BEARISH SURPRISES Geopolitics remain in focus, any escalation in the Ukraine war that risks including NATO would be big negative risks. Also keep Italian politics in mind, where any triggers of general elections risk further spread concerns & pressure the EUR. Spread fragmentation remains in focus, and if the ECB fail to calm fears or even walks back on recent hawkish comments it could trigger bearish reactions in the EUR. Growth concerns continue weighing on the EUR and means incoming growth data (Flash PMIs this week) will be in focus, where any major negative surprises could trigger downside. We've seen a chunky repricing in hike expectations over the past three weeks, and any further lower repricing is expected to weigh on the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 pipeline closely, if Russia keeps gas flows closed after maintenance ends this week it could see EUR downside. BIGGER PICTURE The fundamental outlook for the EUR has shifted to bearish with recent leading indicators pointing to a much faster economic slowdown than markets had previously expected. There are bearish and bullish factors in play right now though. On the bearish side we have geopolitics, stagflation, spread fragmentation and energy concerns acting as negative drivers. But we also have hawkish ECB policy as a possible supportive driver. Recession risks does open up a narrative change for the EUR which will require markets to change their forecasts to reflect higher recession risks which should continue to weigh on the EUR. GBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. The price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower is very risky right now. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data could trigger strong bullish reactions. The UK is facing a huge cost-of-living squeeze, which means lower-than-expected inflation could counterintuitively be a positive driver (as lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. Any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in could trigger bullish reactions. POSSIBLE BEARISH SURPRISES Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI could trigger bearish reactions. Politicsremain a focus, where any attempts by a new PM in the weeks or months ahead to call for a snap election should cause unnecessary uncertainty and could trigger GBP downside. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. Any overly dovish comments signalling less aggressive policy than what markets are currently pricing in could trigger bearish GBP reactions. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured, alongside expectations that the BoE might not be too far away from pausing their hiking cycle. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Positioning has been looking stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion, and also means the risk to reward favours short-term upside on strong bullish catalysts.
by thunderpips
1
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE In recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank confirming at least a 25bsp hike for July and possibility of a 50bsp hike in September. Despite the hawkish policy shift, the concerns over fragmentation in bond spreads (BTP\Bund) as well as fears of growing stagflation risks has seen the EUR struggle to hold onto any hawkish ECB momentum. The ECB did try to comfort spread concerns with promises of a new fragmentation tool, and even though it has kept spreads from widening further, concerns remain. If the bank can convince markets that their new spread tool(s) can stop fragmentation it should be supportive for the EUR. However, with a material energy crisis facing the EZ due to the war in Ukraine, the economic prospects look bleak. Even though growth data was surprisingly resilient in Q2, fresh recession fears ramped up as recent forward-looking growth data surprised materially lower for key members like Germany and France. Based on the forward-looking signals from leading indicators we think recession is likely in the EZ and that the narrative has turned more bearish for the EUR until that improves. POSSIBLE BULLISH SURPRISES Geopolitics remains a focus, and any possible de-escalation or cease fire in Ukraine would open up a lot of EUR upside. Also keep Italian politics in mind where any successful attempt by PM Draghi to stay in power should ease spread concerns. Stagflation fears are high, with growth expected to slow while inflation stays high. Recent PMI data has invigorated recession fears, which means any materially better-than-expected growth data (Flash PMIs this week) could spark upside. Even though the ECB’s recent communication has been enough to push BTP/ Bund spreads from their recent highs the concerns remain, especially with Italian politics further exacerbating the problem. Thus, any insights or clarity regarding their new tool that convinces markets it can solve fragmentation should be supportive for the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 pipeline closely, if Russia resumes gas flows after maintenance ends this week it could see EUR upside. POSSIBLE BEARISH SURPRISES Geopolitics remain in focus, any escalation in the Ukraine war that risks including NATO would be big negative risks. Also keep Italian politics in mind, where any triggers of general elections risk further spread concerns & pressure the EUR. Spread fragmentation remains in focus, and if the ECB fail to calm fears or even walks back on recent hawkish comments it could trigger bearish reactions in the EUR. Growth concerns continue weighing on the EUR and means incoming growth data (Flash PMIs this week) will be in focus, where any major negative surprises could trigger downside. We've seen a chunky repricing in hike expectations over the past three weeks, and any further lower repricing is expected to weigh on the EUR. Energy concerns are still in focus, which means watching the Nord Stream 1 pipeline closely, if Russia keeps gas flows closed after maintenance ends this week it could see EUR downside. BIGGER PICTURE The fundamental outlook for the EUR has shifted to bearish with recent leading indicators pointing to a much faster economic slowdown than markets had previously expected. There are bearish and bullish factors in play right now though. On the bearish side we have geopolitics, stagflation, spread fragmentation and energy concerns acting as negative drivers. But we also have hawkish ECB policy as a possible supportive driver. Recession risks does open up a narrative change for the EUR which will require markets to change their forecasts to reflect higher recession risks which should continue to weigh on the EUR. GBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. The price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower is very risky right now. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data could trigger strong bullish reactions. The UK is facing a huge cost-of-living squeeze, which means lower-than-expected inflation could counterintuitively be a positive driver (as lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. Any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in (see our Rate Tracker for STIR expectations) could trigger bullish reactions. POSSIBLE BEARISH SURPRISES Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI could trigger bearish reactions. Politicsremain a focus, where any attempts by a new PM in the weeks or months ahead to call for a snap election should cause unnecessary uncertainty and could trigger GBP downside. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. Any overly dovish comments signalling less aggressive policy than what markets are currently pricing in could trigger bearish GBP reactions. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured, alongside expectations that the BoE might not be too far away from pausing their hiking cycle. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Positioning has been looking stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion, and also means the risk to reward favours short-term upside on strong bullish catalysts.
Editors' picks
by thunderpips
19
EURGBP can move lower? 🦐EURGBP on the 4h chart broke as expected the weekly resistance and reached the 0.84400 level. The price is now testing the daily support and a bearish continuation can be possible. How can i approach this scenario? I will wait for the EU market open and if the price will break below i will look for a nice short order according to the Plancton's strategy rules. ––––– Follow the Shrimp 🦐 Keep in mind. 🟣 Purple structure -> Monthly structure. 🔴 Red structure -> Weekly structure. 🔵 Blue structure -> Daily structure. 🟡 Yellow structure -> 4h structure. ⚫️ Black structure -> <4h structure. Here is the Plancton0618 technical analysis , please comment below if you have any question. The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger.
Short
by InkyGrip
EURGBP can move lower? -UPDATE -🦐EURGBP on the 4h chart broke as expected the weekly resistance and is now trading above a minor support. The price can now bounce over the structure and a break can happen before the end of the week. How can i approach this scenario? I will wait for the EU market open and if the price will break below i will look for a nice short order according to the Plancton's strategy rules. ––––– Follow the Shrimp 🦐 Keep in mind. 🟣 Purple structure -> Monthly structure. 🔴 Red structure -> Weekly structure. 🔵 Blue structure -> Daily structure. 🟡 Yellow structure -> 4h structure. ⚫️ Black structure -> <4h structure. Here is the Plancton0618 technical analysis , please comment below if you have any question. The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger.
Short
by InkyGrip
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The EUR has had a bumpy ride over the past few months. At the onset of the war in Ukraine the EUR tumbled across the board. However, in recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank confirming at least a 25bsp hike for July and possibility of a 50bsp hike in September. Despite the hawkish policy shift, the concerns over fragmentation in bond spreads (BTP\Bund) as well as fears of growing stagflation risks has seen the EUR struggle to hold onto any hawkish ECB momentum. The ECB did try to comfort spread concerns with promises of a new fragmentation tool, and even though it has kept spread from widening further, concerns remain. If the bank can convince markets that their new spread tool(s) can stop fragmentation it should be supportive for the EUR. The bank did back up their attempts at calming fragmentation fears after an ad-hoc meeting by saying they are looking at introducing an additional ‘tool’ as quick as possible, so markets will be focused on any insights into what that tool might be. Even though growth data has been surprisingly resilient in the past few months, the recession fears ramped up as recent growth data surprised meaningfully lower for key members like Germany and France. Based on the forward-looking signals from leading indicators we think recession is likely in the EZ and that the narrative has turned more bearish for the EUR until that improves. POSSIBLE BULLISH SURPRISES Geopolitics remains a focus for the EUR, where any possible de-escalation or cease fire in the Ukraine war would open up a lot of appreciation for the EUR. Stagflation fears are high, with growth expected to slow while inflation stays high. Recent PMI data has invigorated recession fears, which means any materially better-than-expected growth data (ZEW data this week) could spark upside. Even though the ECB’s recent communication has been enough to push BTP/ Bund spreads from their recent highs the concerns remain. Thus, any insights or clarity regarding their new tool that convinces markets it can solve fragmentation should be supportive for the EUR. POSSIBLE BEARISH SURPRISES Spread fragmentation remains in focus, and if the ECB fail to calm fears or even walks back on recent hawkish comments it could trigger bearish reactions in the EUR. Flash PMIs confirmed fears of possible recession. We expect growth concerns to continue weighing on the EUR and means incoming growth data (ZEW data this week) will be in focus, where any major negative surprises could trigger downside. Watch those hike expectations. With a lot of froth recently baked into STIR markets for the ECB, we've seen a chunky repricing in hike expectations over the past three weeks, and any further lower repricing is expected to weigh on the EUR. BIGGER PICTURE The fundamental outlook for the EUR has shifted to bearish with recent leading indicators pointing to a much faster economic slowdown than markets had previously expected. There are bearish and bullish factors in play right now though. On the bearish side we have geopolitics, stagflation and spread fragmentation acting as negative drivers. But we also have hawkish ECB policy as a possible supportive driver. We do think the disappointing data does open up a narrative change for the EUR which will require more market participants to change their forecasts to reflect higher risk of recession, and that should weigh on the EUR. GBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. The price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower is very risky right now. It also means we would favour upside opportunities on solid bullish short-term catalysts. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data could trigger strong bullish reactions. The UK is facing one of its biggest cost of living squeezes in history, lower-than-expected inflation could counterintuitively be a positive driver for the currency (lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. Any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in (see our Rate Tracker for STIR expectations) could trigger bullish reactions. POSSIBLE BEARISH SURPRISES Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI could trigger bearish reactions. Politics is also in focus, where any attempts by a new PM in the weeks or months ahead to call for a snap election should cause unnecessary uncertainty and could trigger GBP downside. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. Any overly dovish comments signalling less aggressive policy than what markets are currently pricing in. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured, alongside expectations that the BoE might not be too far away from pausing their hiking cycle. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Positioning has been looking stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion, and also means we would favour upside on strong bullish catalysts in the very short-term
by thunderpips
2
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The EUR has had a bumpy ride over the past few months. At the onset of the war in Ukraine the EUR tumbled across the board. However, in recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank confirming at least a 25bsp hike for July and possibility of a 50bsp hike in September. Despite the hawkish policy shift, the concerns over fragmentation in bond spreads (BTP\Bund) as well as fears of growing stagflation risks has seen the EUR struggle to hold onto any hawkish ECB momentum. The ECB did try to comfort spread concerns with promises of a new fragmentation tool, and even though it has kept spread from widening further, concerns remain. If the bank can convince markets that their new spread tool(s) can stop fragmentation it should be supportive for the EUR. The bank did back up their attempts at calming fragmentation fears after an ad-hoc meeting by saying they are looking at introducing an additional ‘tool’ as quick as possible, so markets will be focused on any insights into what that tool might be. Even though growth data has been surprisingly resilient in the past few months, the recession fears ramped up as recent growth data surprised meaningfully lower for key members like Germany and France. Based on the forward-looking signals from leading indicators we think recession is likely in the EZ and that the narrative has turned more bearish for the EUR until that improves. POSSIBLE BULLISH SURPRISES Geopolitics remains a focus for the EUR, where any possible de-escalation or cease fire in the Ukraine war would open up a lot of appreciation for the EUR. Stagflation fears are high, with growth expected to slow while inflation stays high. Recent PMI data has invigorated recession fears, which means any materially better-than-expected growth data (ZEW data this week) could spark upside. Even though the ECB’s recent communication has been enough to push BTP/ Bund spreads from their recent highs the concerns remain. Thus, any insights or clarity regarding their new tool that convinces markets it can solve fragmentation should be supportive for the EUR. POSSIBLE BEARISH SURPRISES Spread fragmentation remains in focus, and if the ECB fail to calm fears or even walks back on recent hawkish comments it could trigger bearish reactions in the EUR. Flash PMIs confirmed fears of possible recession. We expect growth concerns to continue weighing on the EUR and means incoming growth data (ZEW data this week) will be in focus, where any major negative surprises could trigger downside. Watch those hike expectations. With a lot of froth recently baked into STIR markets for the ECB, we've seen a chunky repricing in hike expectations over the past three weeks, and any further lower repricing is expected to weigh on the EUR. BIGGER PICTURE The fundamental outlook for the EUR has shifted to bearish with recent leading indicators pointing to a much faster economic slowdown than markets had previously expected. There are bearish and bullish factors in play right now though. On the bearish side we have geopolitics, stagflation and spread fragmentation acting as negative drivers. But we also have hawkish ECB policy as a possible supportive driver. We do think the disappointing data does open up a narrative change for the EUR which will require more market participants to change their forecasts to reflect higher risk of recession, and that should weigh on the EUR. GBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. The price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower is very risky right now. It also means we would favour upside opportunities on solid bullish short-term catalysts. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data could trigger strong bullish reactions. The UK is facing one of its biggest cost of living squeezes in history, lower-than-expected inflation could counterintuitively be a positive driver for the currency (lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. Any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in (see our Rate Tracker for STIR expectations) could trigger bullish reactions. POSSIBLE BEARISH SURPRISES Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI could trigger bearish reactions. Politics is also in focus, where any attempts by a new PM in the weeks or months ahead to call for a snap election should cause unnecessary uncertainty and could trigger GBP downside. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. Any overly dovish comments signalling less aggressive policy than what markets are currently pricing in. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured, alongside expectations that the BoE might not be too far away from pausing their hiking cycle. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Positioning has been looking stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion, and also means we would favour upside on strong bullish catalysts in the very short-term
by thunderpips
4
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The EUR has had a bumpy ride over the past few months. At the onset of the war in Ukraine the EUR tumbled across the board. However, in recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank confirming at least a 25bsp hike for July and possibility of a 50bsp hike in September. Despite the hawkish policy shift, the concerns over fragmentation in bond spreads (BTP\Bund) as well as fears of growing stagflation risks has seen the EUR struggle to hold onto any hawkish ECB momentum. The ECB did try to comfort spread concerns with promises of a new fragmentation tool, and even though it has kept spread from widening further, concerns remain. If the bank can convince markets that their new spread tool(s) can stop fragmentation it should be supportive for the EUR. The bank did back up their attempts at calming fragmentation fears after an ad-hoc meeting by saying they are looking at introducing an additional ‘tool’ as quick as possible, so markets will be focused on any insights into what that tool might be. Even though growth data has been surprisingly resilient in the past few months, the recession fears ramped up growth data continuing to surprise lower for key EU countries like Germany and France. Based on the forward-looking signals from leading indicators we think recession is likely in the EZ and that the narrative will turn more bearish for the EUR in the weeks ahead. POSSIBLE BULLISH SURPRISES Geopolitics remains a focus for the EUR, where any possible de-escalation or cease fire in the Ukraine war would open up a lot of appreciation for the EUR. Stagflation fears are high right now for the Eurozone, with growth expected to slow while inflation stays persistently high. Recent PMI data has invigorated recession fears, which means any materially better-than-expected growth data could spark some upside for the single currency. Even though the ECB’s recent communication has been enough to push BTP/ Bund spreads from their recent highs the concerns remain. Thus, any insights, clarity regarding their new tools that convinces markets it can solve fragmentation should be supportive for the USD. POSSIBLE BEARISH SURPRISES Spread fragmentation remains in focus, and if ECB speak in the week ahead fails to calm fears or walks back on recent hawkish comments it could trigger bearish reactions in the EUR. Flash PMIs confirmed growth risks in the EU is very much alive, we expect growth concerns to continue weighing on the EUR and means incoming growth data will be in focus. Watch those hike expectations. With a lot of froth recent baked into STIR markets for the ECB, we've seen a chunky repricing in hike expectations and any further lower repricing is expected to weigh on the single currency. BIGGER PICTURE The fundamental outlook for the EUR has shifted to bearish with recent leading indicators pointing to a much faster economic slowdown than markets had previously expected. On the bearish side we have geopolitics, stagflation and spread fragmentation acting as negative drivers. But we also have hawkish ECB policy as a possible supportive driver. The disappointing data does open up a potential narrative change for EURGBP as well as the EURJPY so key pairs to keep on the radar in weeks ahead. GBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. The price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower is very risky right now. It also means we would favour upside opportunities on solid bullish short-term catalysts. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data could trigger strong bullish reactions. The UK is facing one of its biggest cost of living squeezes in history, lower-than-expected inflation could counterintuitively be a positive driver for the currency (lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. We have lots of BoE speak next week, and any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in could trigger bullish GBP reactions. POSSIBLE BEARISH SURPRISES Monetary policy is a double-edged sword for the GBP. Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI prints could trigger bearish reactions. Politics is also in focus, where any attempts to oust PM Johnson by changing no-confidence laws could trigger bearish reactions. GBP is usually sensitive to political uncertainty and anything that raises odds of a snap election should be negative. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. We have lots of BoE speak next week, and any overly dovish comments signalling less aggressive policy than what markets are currently pricing in could trigger bearish GBP reactions. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Positioning has been looking stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion, and also means we would favour upside on strong bullish catalysts.
by thunderpips
1
EURGBP can move lower? 🦐EURGBP on the 4h chart is trading over a weekly support. The price after the break and retets of the ascending trendline is now looking for a possible lower low. How can i approach this scenario? I will wait for the EU market open and if the price will break below support area i will check for a nice short order according to the Plancton's strategy rules. ––––– Follow the Shrimp 🦐 Keep in mind. 🟣 Purple structure -> Monthly structure. 🔴 Red structure -> Weekly structure. 🔵 Blue structure -> Daily structure. 🟡 Yellow structure -> 4h structure. ⚫️ Black structure -> <4h structure. Here is the Plancton0618 technical analysis , please comment below if you have any question. The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger.
Short
by InkyGrip
4