EUR and GBP Outlook – 20 April 2009

printprofile

EUR
The EUR fell against the Dollar as this past week’s trading of the Euro-Zone currency was driven by a looming rate cut from European Central Bank (ECB). Traders have all but priced in another 0.25% rate cut as economic numbers have yet to show a strong sign of improvement.

Market forces are also playing out scenarios for the possibility of quantitative easing moves being undertaken by the ECB as comments from ECB President Jean-Claude Trichet hinted that the possibility remains open. These comments helped drive the EUR/USD to a 1-month low during Friday’s trading session of 1.3104. This level has not been seen since the U.S. unveiled its own quantitative easing program.

This coming week will have the release of surveys gauging the business climate in the Euro-Zone economy. On Tuesday, the German ZEW Economic Sentiment report will be released, and is expected to show a very positive result. However, some analysts may have been caught up in the recent rally in equity markets and could be a bit too bullish. This may be a good time to go short on the EUR/USD. We could see the pair trading near the 1.2850 level by Friday.

GBP
The Pound continues its correction against the Dollar as a brighter economic outlook helped the Pound rise further this week. The Pound ended the week up against the Dollar at 1.4795 from 1.4674 and down.

Against the EUR, the Pound extended its bullish trend to a 4th week in a row. This pair may be a bit undervalued at the 0.8830 level.

Preliminary GDP is due out on Friday as analysts’ consensus estimate is for a contraction in the first quarter of 1.5%. This could be an overly aggressive estimate. Worse results could send the EUR/GBP above the 0.8900 mark.