The euro remained range-bound against the pound on the first trading day of this week as economic data from both Germany and the UK missed estimates. While the German business climate index declined for the second consecutive month, the Confederation of British Industry’s distributive trades index missed forecasts. Overall, the EUR/GBP pair traded in a narrow range of between 0.8542 and 0.8594 in the past 24 hours.
According to the data published by the Ifo Institute, the German business climate index declined to 88.50 in June from 91.70 in May and missed forecasts of 90.70. The reported reading reflects the lowest reading since December 2022. Manufacturers reported an overall decrease in fresh orders as a result of the demand-stifling impact of worldwide interest rate increases, highlighting the continued ambiguity underlying the rebound of Europe’s economic powerhouse.
Notably, capacity utilization in Germany rose to 84.50% in the June 2023 quarter from 84.30% in the March 2023 quarter.
The Ifo Expectations index, reflecting the level of optimism for the upcoming months, fell to 83.60 points in June from 88.30 points in May and missed forecasts of 88. Likewise, the Ifo current conditions index decreased to 93.70 in June from 94.80 in the previous month. Economists were expecting a reading of 93.50.
The Confederation of British Industry’s distributive trades index improved to -9 in June from -10 in May but missed forecasts of -6. The reported reading reflects the second successive monthly decline as inflationary pressure continues to remain high. However, traders anticipate sales volumes to firm up in July, although they expect challenges to continue in the upcoming months.
Orders received by suppliers fell by -10% in the year to June, which is considerably better than the -30% decline recorded in the year to May. In July, suppliers expect orders to decline by 9%.
Stock positions at retailers stood firm, growing at 33% in the year to June, compared with a 25% increase in the year to May. In July, stock volumes concerning anticipated sales are expected to remain 26% higher.
Also, in the year to June, internet sales volumes rebounded with a growth of 26%, compared with a decline of 9% in May. The survey participants anticipate a growth of 27% in July.
As per the report, the current season’s retail sales volumes were deemed “average,” signifying a 1% rise from the prior month’s decrease of 18% in May. Traders expect retail sales volumes to decline by about 2% in July.
Wholesale volumes declined at a steeper pace of -15% in June, compared with -5% in May. Wholesalers project volumes to further contract in July, but only by about 8%.
The weak economic data from both countries are expected to keep the EUR/GBP pair range bound in the short term.
The historical price chart indicates that the EUR/GBP pair is rising after testing support at 0.8540. The next resistance is anticipated only near 0.8710. Additionally, the currency pair is trading above its 50-day moving average, while the RSI indicator is showing a reading above 50. Therefore, we anticipate the EUR/GBP pair to remain in an uptrend in the near term.
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.
