Brexit Briefing: Event Risk to Keep EUR/GBP Under Pressure

Talking Points

– The triggering of Article 50 to start a UK/EU divorce routine is substantially still 6 weeks away.

– Over that period and beyond, courtesy will approaching concentration on a Euro side of a EUR/GBP cross, and with so most eventuality risk ahead, that could meant weakness.

– See a DailyFX Economic Calendar and see what live coverage for pivotal eventuality risk impacting FX markets is scheduled for a week on a DailyFX Webinar Calendar.

What could presumably go wrong for a Euro? Actually, rather a lot; quite on a domestic front.

For a start, there’s Greece. There is now roughly no possibility that Greece’s latest bailout will be concluded by a Eurogroup of ministers this entrance Monday. Negotiations between a Greek supervision and a official-sector creditors have stalled due to a refusal by a Greek supervision to determine to serve purgation measures, and so distant a International Monetary Fund and a European Commission have been incompetent to determine on how to tackle a Greek crisis.

Germany, in particular, is dynamic that a IMF takes part, that it now seems demure to do. “We are conference about a good swell in a talks… with Greece,” a German Finance Ministry spokeswoman pronounced Friday. “We have a convergence. But we are not so distant technically that on Monday a final preference on a end of a examination can take place,” she added.

Concern about a miss of swell in a talks has lifted a produce on 10-year Greek supervision holds to 7.81% now from a new low of 6.43% in early December.

Then there’s a European Central Bank. The mins of a assembly on Feb 17, expelled Thursday, suggested it’s doubtful to revoke a stream monetary-stimulus module any time soon, in sheer contrariety to a US, where policymakers seem dynamic to tie process in a entrance months. That’s a clear disastrous for a Euro, even yet EURUSD has only damaged out of a downward channel on a draft that had formerly contained it via February.

Chart: EURUSD 1-Hour Timeframe (February 2017)

Brexit Briefing: Event Risk to Keep EUR/GBP Under Pressure

Source: IG

An ECB dynamic to keep financial process lax is approaching to lead to Euro debility not only opposite a US Dollar though opposite other currencies too.

The Euro also looks approaching to humour from a arriving elections in a Netherlands, France, Germany and presumably Italy. In a Netherlands, a frontrunner is Geert Wilders, a worried candidate, and if he wins as approaching that would chaperon in a prolonged duration of bloc talks. In France, a worried Marine Le Pen has a possibility of feat as both her categorical rivals’ campaigns are spluttering. And in Germany it’s not unfit that Chancellor Angela Merkel could be defeated.

As with EURUSD, EURGBP has damaged aloft though with all these elections on a setting it seems doubtful to strengthen most further.

Chart: EURGBP 1-Day Timeframe (October 2016 – Feb 2017)

Brexit Briefing: Event Risk to Keep EUR/GBP Under Pressure

Source: IG

The rising tensions within a Euro-Zone have led to a widening of produce spreads between 10-year emperor holds in Germany and those in Euro-Zone member states such as France and Italy that are viewed to be reduction strong financially. Add in speak of a hillside to France’s credit rating and a breakup of a EU if Le Pen wins a choosing there, and Brexit could infer to be only a daze in a weeks and months ahead.

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Upcoming UK/EU Event Risk

— Written by Martin Essex, Analyst and Editor

To hit Martin, email him during martin.essex@ig.com

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