Video Source: DW News on YouTube
The euro remained range-bound against the pound despite the release of weak German factory orders data for July and poor Eurozone retail sales data for the same period. The UK construction PMI data for August was better than anticipated. Still, the pound was unable to gather momentum. This paved the way for the EUR/GBP pair to trade in a narrow range of between 0.8530 and 0.8560 in the past 24 hours.
According to Destatis, German factory orders fell by 11.70% m-o-m in July, following a 7.60% growth in the previous month and worse than forecasts of a 4.30% decline.
On a y-o-y basis, German factory orders declined 10.50% in July 2023.
Excluding major orders, fresh orders rose by 0.30% m-o-m in July.
Aircraft and spacecraft orders fell by 54.50 % m-o-m in July after surging 72.40% in June.
Orders for the manufacture of data processing equipment and electronic and optical products slumped by 23.60% m-o-m in July. Likewise, mechanical engineering recorded a decline of 8.70%, while electrical equipment orders dipped by 16.70%. Metal products posted a decrease of 14.20% in the same period. On the contrary, manufacturers of motor vehicles and parts posted a growth of 2.7% in July 2023.
Capital goods orders plunged 15.90% in July. Similarly, intermediate goods and consumer goods posted a decline of 4.50% and 8.20%, respectively.
Overseas orders declined by 12.90% m-o-m in July.
Eurozone retail sales fell by 0.20% m-o-m in July following a 0.20% growth in the previous month and missed forecasts of 0.10% decline. The volume of retail trade decreased by 1.20% m-o-m for automotive fuels in July. On the contrary, food, drinks, and tobacco recorded an increase of 0.40%. Likewise, non-food products posted a rise of 0.50%.
On a y-o-y basis, retail sales fell by 1% in July 2023. The volume of retail trade declined by 3.40% for automotive fuels. Likewise, food, drinks, and tobacco recorded a decrease of 2.20%. However, non-food products posted an increase of 1.10%.
The S&P Global / CIPS UK Construction PMI (purchasing managers’ index) inched down to 50.80 in August from 51.70 in July and pleased the market which was expecting a fall in the construction PMI to 49.80 (a reading below 50 indicates contraction and vice versa).
Commercial building activity recorded the strongest rate of growth, with a corresponding index of 54.20 (roughly a five-month high). The civil engineering index also grew to 52.40, but the pace of growth fell to the lowest level since April. House building was in contraction territory, with the corresponding index at 40.70 in August. The figure reflects the second-quickest decline since May 2020.
The decline in order books was the steepest since May 2020. Employment grew for seven successive months, but the pace of growth has eased since July. The survey also indicated that construction firms are slightly cautious about the outlook for business activity in the upcoming 12 months. Specifically, the level of optimism fell to its lowest since January.
The weak German factory order data is expected to turn the EUR/GBP pair slightly bearish in the short term.
The historical price chart indicates that the EUR/GBP pair is ascending after testing the support at 0.8520. The next resistance is anticipated to be only near 0.8610. Additionally, the currency pair is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate the EUR/GBP pair to remain in an uptrend for the next few trading days.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
