Euro tests 10-day lows against British Pound after UK, Eurozone preliminary PMIs

EUR/GBP eases to the 0.8640 area after rejection above 0.8650.
Eurozone preliminary PMIs hint at a significant downturn in business activity in May.
UK services activity also dropped in May, but the manufacturing sector has shown resilience.

Guillermo Alcala FXStreet

The Euro’s (EUR) frail recovery attempt against the British Pound (GBP) has been capped below 0.8660, as the pair retreats on Thursday, testing one and a half week lows below 0.8642 at the time of writing. Eurozone preliminary HCOB Purchasing Manager’s Index (PMI) data has disappointed, while the UK’s business activity seems more resilient amid the energy shock stemming from Iran’s war.

Eurozine's preliminary PMIs for May, released earlier on Thursday, revealed that business activity in the service sector dove to a 63-month low of 46.4, from 47.6 in April, against expectations of an uptick to 47.7. Manufacturing activity slowed down to 51.4 in May, from 52.2 in April, also below the 51.9 expected.

Down to member countries, France’s Composite PMI fell to a 66-month low of 43.5, from 47.6 in April, with the Manufacturing PMI slumping to 48.9 from 52.8 in April, and Services PMI dropping to 42,9 from 46.5 in the previous month. German PMI figures were also negative, with both the manufacturing and services sectors contracting.

In the UK, May’s Preliminary S&P Global PMIs revealed that the services sector fell to contraction levels, at 47.9, from 52.7 in April, against market expectations of a softer slowdown to 51.8. The Manufacturing PMI, on the other hand, remained unchanged from April at expectations 53.7 level, beating expecttons of a moderate slowdown, to 53.0.

Economic Indicator

HCOB Composite PMI

The Composite Purchasing Managers’ Index (PMI), released on a monthly basis by S&P Global and Hamburg Commercial Bank (HCOB), is a leading indicator gauging private-business activity in the Eurozone for both the manufacturing and services sectors. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the private economy is generally expanding, a bullish sign for the Euro (EUR). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for EUR.

Economic Indicator

S&P Global Composite PMI

The Composite Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging private-business activity in UK for both the manufacturing and services sectors. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation.The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the UK private economy is generally expanding, a bullish sign for the Pound Sterling (GBP). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for GBP.

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