The eurgbp is a cross, and this is one of the most important things to keep in mind, besides the fact that it travels based on the differences between UK and Eurozone economies.
Trading A Currency Pair – EURGBP
It means that an important role in trading the cross is played by the two central banks, the ECB (European Central Bank) and BOE (Bank Of England), so knowing when key events regarding monetary policy are happening is crucial for trading this cross.
Let’s start with the ECB. It is meeting on a monthly basis, on the first Thursday of each month, with January being the sole exception due to holidays of course. Every meeting is being followed 45 minutes later by a press conference and the President of the ECB is reading the Governing Council statement plus takes questions from press representatives.
Euro as a whole is moving drastically on the press conference, which is even more important than the actual interest rate decision.
Moreover, on the same day, 45 minutes before the ECB interest rate decision, BOE is setting the monetary policy. One key fact is that BOE has no press conference to follow the decision, unless the interest rate is changed.
Important Economic Releases To Watch In Europe
It goes without saying that economic news out of Europe are hardly influencing the way the EURGBP pair is moving as well as economic news out of UK.
When it comes to Europe, the most important is the CPI (Consumer Price Index) as it is representing inflation and the ECB (European Central Bank) is looking at inflation for setting up the monetary policy.
The next one in the order of importance is the PMI (Purchasing Manager Index) release as it shows if a sector is contracting or expanding and offers a clue regarding how the central bank is going to interpret the data: bullish or bearish, hawkish or dovish.
GDP (Gross Domestic Product) and unemployment rate are also pieces of data traders take into consideration when trading the EURGBP but the Euro does move when ECB is holding its monthly meeting as each and every meeting is being followed by a press conference. During this press conference, press representatives are asking questions and ECB President is answering and as a consequence market is fluctuating quite much.
After all, economic releases in a month are only for traders to form an educated guess about what the central bank is going to do next time a meeting takes place. If inflation, for example, is falling way below ECB’s target, then it is only normal to expect rates being cut and thus a negative for Euro as a whole and for EURGBP in particular.
Important Economic Releases To Watch In UK
United Kingdom is one of the most important economies in the world and the currency, the Great Britain pound, is hardly influenced when economic news are being released.
Even though the UK is a member of the European Union, it is worth mentioning that it is not having the Euro as a currency, so it is not part of the Eurozone.
Bank Of England is the central bank and the mandate is to keep inflation around two percent. In order to address that mandate, the MPC (Monetary Policy Committee) is meeting on a monthly basis to assess the economy.
The MPC meeting is not followed by a press conference like it is the case of the ECB (European Central Bank) unless the interest rate is being changed.
The GBP is strongly influenced when the GDP is being released (Gross Domestic Product) and the preliminary release is the most important one as the final one is rarely being different. Besides GDP, Retail Sales and PMI’s (Purchasing Manager Index) have the power to move markets as well as the CPI (Consumer Price Index) or inflation. In fact, inflation is on the top priorities list Bank of England has and when the Inflation Letter is being released markets are moving quite aggressively.
On the PMI side, it is worth mentioning that they are being split in the service, construction and manufacturing sectors.
What To Expect From Economic Releases
Expect strong and sharp moves to come when EURGBP is travelling and also expect a lot of volatility surrounding the Euro pairs. If one is looking at the bigger time frames then there is a clear and distinct correlation between the EURUSD pair and EURGBP and therefore we can safely assume that most of the times they move together.
This means that if one is looking for EURUSD to move higher and EURGBP lower then most of the times this is not going to happen.