EUR/GBP: Euro Gains Ahead of the EU Economic Summit

In the previous European trading session, the Euro advanced versus the British pound as markets look ahead to this week’s European summit, where the European finance leaders would discuss about ways to stem the debt crisis. However, gains of the single currency were reduced as asking prices for UK homes rose to the highest level in eight months, indicating that the property market is not performing worse than some expected. In today’s European trades, the shared currency is expected to sustain gains versus the Pound.

The European officials are set to meet once again on Thursday in one of their many attempts to overcome the debt crisis and ahead of the summit, the single currency is expected to draw support. The Greek government has been struggling with the troika officials on the issue of austerity, prolonging the already existing uncertainties in the region. But Greek Prime Minister Antonis Samaras expressed optimism that an agreement as regards the austerity measure would be reached just in time for Thursday’s European Summit. Spain’s delay in requesting for a bailout from the Euro area’s bailout fund is also seen to weigh on the shared currency. Spanish Prime Minister Mariano Rajoy continues to hold on to his belief that his country does not need financial aid despite facing mounting pressure to avail of such help. A Spanish bailout is seen as favorable to the Euro as it would activate the European Central Bank’s bond-buying and help lower the country’s borrowing costs.

In today’s economic releases, the shared currency is expected to get support from the German ZEW Economic Sentiment data. Although investor sentiment in October is likely to remain in the negative region, any improvement is seen to give support to the Euro. Meanwhile, the Sterling is likely to decline as inflation in September is expected turn lower by 2.2 percent, giving more scope for the Bank of England to expand monetary stimulus. As such, a buy position for the EUR/GBP pair is recommended in today‚Äôs European trades.

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