British Pound (GBP), Price Outlook: Near-Term Bullish on EUR/GBP

GBP PRICE, NEWS & ANALYSIS:

British Pound (GBP), Price Outlook: Near-Term Bullish on EUR/GBP
  • Luis de Guindos, Vice President of the European Central Bank, stated Wednesday that the Eurozone's economy is growing faster then the ECB had previously anticipated. This could bring closer the day when the ECB will end its monetary stimulus programs.
  • That's positive for EUR/GBP and the message may well be reinforced later in the day by the hawkish Bundesbank President Jens Weidmann.

EUR/GBP OUTLOOK STILL POINTIVE

EUR/GBP was edging lower in early European trading Wednesday, possibly reacting to data showing that German retail sales fell by 0.3% year/year in July when a 3.7% increase had been forecast by economists polled by the news agencies. The month/month drop was also much higher than anticipated.

The data are from July, so it is not surprising that the EUR/GBP decline would be reversed. According to El Confidencial, Luis de Guindos, Vice President of the European Central Bank, stated Wednesday that the Eurozone's "economy is performing better than we expected in 2021. This will be reflected by the projections that will soon be published."

This suggests that the ECB may begin to withdraw some of its monetary stimuli earlier than originally expected - potentially a positive outcome for EUR/GBP.

Jens Weidmann (hawkish Bundesbank President) could repeat the de Guindos message later in this session. He is scheduled to open a Bundesbank symposium at 1200 GMT. Weidmann could back his case by referring specifically to this week's news about Eurozone inflation rising by 3% annually in August, compared to the 2.7% forecast and the previous 2.2%.

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