EUR/GBP was at a standstill on Thursday after the release of the European Purchasing Managers Index (PMI) data. The pair was trading slightly lower at £0.85840.
European Economic Stance
According to UK service providers, August was the worst month for business activity growth since March. The slowdown partly reflected a normalization of customer demand after the easing of the pandemic restrictions in the second quarter of 2021.
Staff shortages, as well as supply bottlenecks, constrained growth in August. Employment recorded the sharpest growth rate since July 1986. The cost inflation rate eased since the previous month, albeit was the second-fastest seen in 25 years.
The headline seasonally adjusted IHS Markit/ CIPS UK Services PMI Business Activity Index fell from 59.6 in July to 55.0 in August. The seasonally adjusted UK Composite Output index slipped to 54.8 in August. Private sector output growth eased considerably since July.
The euro area economy recorded another expansion in business activity during August. However, the growth momentum slightly slowed down in August. The IHS Markit Eurozone PMI Composite Output Index came in at 59.0 in August.
The Eurozone PMI Services Business Activity Index signaled a slight loss growth, falling from July’s 15-year high of 59.8 to 59.0. New business intakes signaled a slower growth. Service sector employment recorded a strong increase in August.
EUR/GBP Technical Analysis
The daily chart shows that the EUR/GBP has been under intense pressure. The currency pair has been declining for the past four months. It hit an intraday high of £0.8592 before pulling back.
It is trading above the 25-day and 50-day exponential moving averages. It is also trading above the 50-day moving average.
Therefore, depending on the European economic outlook, the EUR/GBP pair is likely to edge higher. If this happens, the next logical target will be the resistance at £0.8672. On the flip side, a move below the key support at £0.85005 will invalidate this view.