EURGBP started last week at 0.86569 to consistently fall over the course of the week to a most recent low of 0.84844 last Thursday. Since then, however, price has stabilized within a range between 0.85800 and 0.84800 over the past four trading sessions. Sterling has benefitted from economic data that has not been as bad as expected especially regarding retail sales, as well as last week’s employment data.
The rest of this week sees various data to be released for both currencies; of particular importance will be the Consumer Price Index for the Euro area. This number will be released tomorrow at 10am; market consensus is for an increase of 0.3% compared to last month’s release at 0.2%. Unemployment data is also expected at the same time and forecasts are for a small decrease to 10.0% from last month’s 10.1%.
This data will be extremely important to gauge how well the European Central Bank’s stimulus program is helping the economy, which in turn may give indications as to how much more liquidity or for how much longer the stimulus program will run.
Also, on Thursday there will be data released for the Euro area, at 9am, and the UK, at 9:30am, for the Purchasing Managers Index, an important measure of economic activity.
If you think that volatility for this pair will increase over the next week then all you need to do is Buy a Straddle strategy, which consists of simultaneously buying a Call option and a Put option with the same strike, expiry and amount.
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