FxWirePro: Bullish/bearish scenarios and FX derivatives trade perspectives of EUR/GBP

Bearish EURGBP scenarios if:

1) Euro growth fails to rebound above 2%

2) EUR appreciation and/or sluggish core CPI delays ECB policy normalization

3) Eventual repatriation by US corporates

4) A Parliamentary majority in the UK goes in favor of customs union membership frustrates a hard Brexit

5) The rejection of the withdrawal bill in parliament precipitates fresh election and/or 2nd referendum

Bullish EURGBP scenarios if:

1) Growth rebounds to 3% by mid-2018;

2) ECB becomes more comfortable with progress on wages and core inflation.

3) The BoE passes on a May hike

4) UK’s Core CPI continues to moderate and wages remain sticky below 3%

5) The UK and EU fail to agree on the Irish border, leading to a non-negotiated Brexit

6) The overt balance of payments pressure

Trade tips:

Sell 2M EURGBP vs. EURAUD corr swap, the intent is to monetize the current lull in the Euro uptrend.

Buy EURGBP 6M6M FVA on UK policy uncertainty, flat vol curve.

Contemplating above short-term trend, at spot reference: 0.8690 levels, you can place options trades to fetch certain yields but a limited loss structure via double-no-touch optionality in next 1-week, EURGBP 2w DNT with 0.8950/0.82 strikes (maintaining 50 pips as a tolerance on either side would be a wise move).

Currency Strength Index: FxWirePro's hourly EUR spot index has shown -122 (which is highly bearish), hourly GBP spot index was at 56 (bullish) while articulating at 07:44 GMT. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex.

FxWirePro launches Absolute Return Managed Program. For more details, visit: 

http://www.fxwirepro.com/invest