G10 TRADE IDEA OF THE WEEK – Buy EURGBP

From the FXWW Chatroom – There are increasing indications of PM Cameron aiming for an EU referendum this summer, requiring him getting a deal signed with his EU partners at the February Summit. The EU is dealing with the refugee crisis, risking the UK not getting the attention is requires. Hence, there is a chance of a weak deal not satisfying the eurosceptic wing of the Conservative Party. Pausing cabinet discipline during the EU campaign will not help the ‘Yes’ (staying in EU) side either. Last week Chancellor Osborne cited the vulnerability of the economy, trying to repeat the 2015 election strategy when he pointed out economic risks to convince the electorate not to aim for experimentation. Anyway, rate expectations have been pushed backward, not boding well for a market positioned for the BoE and ECB widening their policy rift. Declining risk appetite and falling commodity prices weaken GBP and work in favour of EUR. 

We like to buy EURGBP at 0.7510 with a target of 0.7850 and stop at 0.7420.

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