"Unlike some other central banks who have been hawkish in the face of mixed to deteriorating data, this week’s Eurozone economic reports validated the European Central Bank’s positive views. The manufacturing and service sector indices in the Eurozone were revised higher and retail sales increased. In Germany, we also saw factory orders and industrial production rise, reinforcing the recovery in the manufacturing sector and the region’s economy.... According to the ECB’s account of their last monetary policy
meeting released this past week, the “governing council considered whether to adjust their QE
easing bias.” They decided against it at the time but this revelation confirms that the central bank
is getting ready to taper asset purchases. Even ECB member and Bundesbank President Weidmann agreed that the recovery opens door to ECB policy normalization and Nowotny added that QE
is not a permanent policy tool. "
"It is difficult to imagine how the UK central bank
could seriously consider tightening soon with data consistently falling short of expectations. Service, manufacturing and construction sector activity slowed in the June while industrial and manufacturing production turned negative. This along with a stronger pound in May caused the trade deficit to increase. The high inflation
rate, along with tepid investment flows caused by the uncertainty of Brexit is wreaking havoc with UK growth ".
With fundamental difference between the 2 central banks , the Euro
presently appears to be a buy against the Pound....
Technically, entry at recent minor wedge
support and monthly Pivot
at .8765. The overlying long term resistance trendline
at .9150 would be the target.