EUR/GBP trades with modest gains post-EU and UK PMI revisions

At the beginning of the week, the EUR/GBP gained traction, closing near 0.8615 as the Euro gained traction on the back of hawkish comments from European Central Bank (ECB) president Christine Lagarde. On the other hand, the Sterling, traded weak against most of its rivals, despite strong PMI revisions.

Hawkish comments from Lagarde gave the Euro impulse

According to S&P Global and Hamburg Commercial Bank (HCOB), the Composite PMI from the European Union (EU) decreased to 52.8 in May, which was lower than both the consensus estimate of 53.3 and the initial reading of 53.3. Similarly, the Services PMI was revised downward to 55.1 from 55.9. 

However, the Euro managed to hold its ground on the back of Christine Lagarde's comments at the beginning of the American session, showing concern with persistent inflationary pressures. Rising German yields, with 10-year and 2-year bonds, were up by over 3%, signalling market anticipation of the ECB's proactive measures to tackle inflation concerns.

On the British side, the May final estimates of the S&P Global/CPIS, the Composite Purchasing Managers' Index (PMI), saw an upward revision, reaching 54 from the initial reading of 53.9. Similarly, the Services PMI was revised upwards to 55.2 from the previous figure of 55.1.

Levels to watch

Technically speaking, the EUR/GBP maintains a bearish outlook for the short term, as per indicators on the daily chart. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are both showing weakness, standing deep in negative territory. The pair trades below its main moving averages, indicating that the sellers have the upper hand.

In case the pair sees more downside, support levels line up at the 0.8600 zone and below around the 0.8580 area and the multi-month low at the 0.8565 level. Furthermore, a move above 0.8620 would pave the way towards the 0.8650 area and the 20-day Simple Moving Average at 0.8665.