EURGBP price chart
Markets

Put March 4 In Your Diary: It Could Be a Bad Day For EURGBP

DailyFX.com -

Downside risk for EURGBP

- An important date to mark in your diary is March 4. On that day there is a general election in Italy .

- On the same day, the result should be known of a vote by members of Germany's SPD on whether to join a grand coalition with Chancellor Merkel's conservatives .

- The 'wrong' result in either or both could weaken EURGBP.

Learn how to trade like an expert by reading our guide to the Traits of Successful Traders

New to forex and want to find out more about trading EUR ? Take a look at our Forex Trading Guides

Go Short EURGBP

A date to mark in your diary is March 4. On that day there is a general election in Italy and leading in the opinion polls i s the anti-establishment Five Star Movement, which is broadly Eurosceptic. The right-wing Northern League is Eurosceptic too, so if either party becomes part of the coalition government that seems likely once the votes are in, the Euro could suffer.

On the same day, the result should be known of a vote by members of Germany's cent er -left Social Democratic Party on whether to join a grand coalition with Chancellor Angela Merkel's conservatives. If they agree, Germany will finally have a new government. However, if they disagree, then either Merkel will have to form a minority government or there will have to be fresh elections - both potentially negative developments for the currency.

In practice, this means political instability is as much a fear in the E uro -Z one as it is in the UK, where the political future of Prime Minister Theresa May remains under a cloud. If her ruling Conservative Party decides to replace her, or she decides t o call a general election, the P ound would certainly suffer - but currently that seems less likely than it once did.

The current stability of EURGBP therefore seems unlikely to last much longer. One serious possibility is that political pr oblems in Germany or Italy - or a breakthroug h in the Brexit negotiations - knock EURGBP lower, particularly as the European Central Bank shows no sign of bringing forward its timetable for tightening Euro-Zone monetary policy .

EURGBP Price Chart, Daily Timeframe (September 1, 2017 to February 22, 2018)

EURGBP price chart

Chart by IG

As the chart above shows, EURGBP has mostly traded in a relatively narrow range between 0.90 and 0.87 ever since mid-September last year. However, if Germany's SPD votes against a coalition government or Eurosceptics become part of a coalition in Italy, it can be expected to drop. Any move under the January 25 low of 0.8690 would be a strong sell signal, while only a climb above January 12's 0.8929 high would dispel the negativity. A stop just above there would therefore be wise.

--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

For help to trade profitably, check out the IG Client Sentiment data

Like to learn more? L isten to our regular Trading Webinars

original source

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

Learn forex trading with a free practice account and trading charts from IG .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

ForEx

Latest Markets Videos