- EUR/GBP remains sidelined after declining the most in two weeks the previous day.
- ECB hawks retreat as Eurozone, German PMIs slump to multi-month low.
- UK PMIs also appear disappointing but distance from BoE defends British Pound.
- German IFO Sentiment data for July eyed for intraday directions, ECB is the key.
EUR/GBP struggles for clear directions around 0.8630 heading into Tuesday’s European session, licking its wounds near the lowest levels in a week. In doing so, the cross-currency pair prods the bears after witnessing the biggest daily fall in a fortnight amid a cautious mood ahead of the German data.
That said, the quote slumped the previous day after downbeat activity data from Eurozone and Germany flagged fears of a recession in the bloc and pushed back the hawkish bias about the European Central Bank (ECB), even if the 0.25% rate hike is already priced in.
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On Monday, the preliminary readings of the Eurozone HCOB Manufacturing PMI slumped to the lowest level since May 2020, to 42.7 for July from 43.4 prior and versus 43.5 market forecasts. That said, the Services PMI also eased to 51.1 for the said month from 52.0 prior and 52.5 expected while the Composite PMI slid to 48.9 from 49.9 previous readings and analysts’ estimations of 49.7. On the same line, German HCOB Manufacturing PMI also dropped to the 38-month low while Services and Composite PMIs declined below the market expectations and previous readings for July.
On the other hand, the preliminary readings of the UK S&P Global/CIPS Manufacturing PMI for July dropped to the lowest level of 2023 with the 45.0 mark versus the market’s expectations of 46.1 and previous readings of 46.5. That said, the Services PMI also printed a six-month low by declining to 51.5 from 53.7 prior and 53.0 market forecasts. With this, the first readings of the Composite PMI edged lower to 50.7 compared to analysts’ estimations of 52.4 and 52.8 prior.
Forex news fx. It should be noted that the UK PMIs aren’t too good but the distance from the Bank of England (BoE) Monetary policy meeting and UK PM Rishi Sunak’s announcements of multiple stimulus measures to defend the Tory government seems to put a floor under the British Pound (GBP). Even so, the fears of the UK recession test the EUR/GBP bears.
Looking ahead, the ECB Bank Lending Survey and Germany’s IFO poll details will entertain EUR/GBP traders ahead of Thursday’s ECB Interest Rate Decision.
A clear downside break of two-week-long rising support line, now immediate resistance around 0.8665, direct EUR/GBP bears toward the 50-DMA support of around 0.8600.
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