EUR/GBP: In Anticipation of the ECB's Decision On Interest Rates. Fundamental Analysis as of 31.05.2016

EUR/GBP: In Anticipation of the ECB's Decision On Interest Rates. Fundamental Analysis as of 31.05.2016

31 May 2016, 13:48
Roberto Jacobs
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EUR/GBP: In Anticipation of the ECB's Decision On Interest Rates. Fundamental Analysis as of 31.05.2016

EUR/GBP pair has declined for the second consecutive month. The previous 4-month growth of the pair was accompanied by the growth of the euro amid the drop of the European stock markets and purchasing of the the euro as funding currency, as well as the weakness of the pound under the pressure of possible exit of the UK from the EU.

The number of supporters of exit from the EU has increased after a series of terrorist attacks in Belgium in March this year. However, according to recent surveys of ORB sociological orgnization for Daily Telegraph, the number of British citizens who want to remain part of the EU amounts to 51%, while approximately 46% of the UK population would vote for the country's exit from the EU. The policy of the British Prime Minister David Cameron who advocated remaining in the European Union, a number of advantages which he was able to achieve for the UK in Brussels, as well as active promotion by the forces working for European integration, are all bearing fruit.

Back in late April, the Organization for Economic Cooperation and Development (OECD) stated that in case of exit from the EU the UK economy by 2020 would be 3% less than it would be if it remained in the EU. Head of the Bank of England Mark Carney said that if the UK population votes for the country's exit from the EU, the pound may lose 20% of its value.

The pound remains strong after the publication of a series of positive data, including retail sales for April, and the publication of poll results, according to which more than 50% of the UK population are against the exit of the country from the EU. In the meantime, the euro is dropping on the foreign exchange market amid growing European and world indices and the strengthening of the US dollar.

The meeting of the European Central Bank's Governing Council will take place in Vienna on June 1-2. On Thursday (13:45 GMT +2) the ECB's decision on interest rates will be published on. The ECB is unlikely to take any action at this meeting to stimulate inflation and the euro zone economy. In the subsequent press conference, ECB's President Mario Draghi will give comments on the current situation and forecasts for economic growth and inflation in the euro zone.

At 11:00 consumer price indices in the Eurozone in May and the unemployment rate in April will be published. In any case, in anticipation of the ECB's meeting the euro remains weak, including in the EUR/GBP cross pair.

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