Yesterday, despite the delivery of subpar economic data from the UK and Europe, the euro fell versus the pound. German ZEW economic confidence index for July worsened from June’s dismal reading, while the UK’s Claimant Count Change data for June missed predictions. Germany is seen as Europe’s economic engine, hence the market responded negatively to the euro. Over the course of the last day, the EUR/GBP pair fell from a high of 0.8560 to a low of 0.8510.
According to the data published by the UK’s Office for National Statistics, the country’s Claimant Count Change, which reflects the change in the number of people claiming unemployment-linked benefits, increased by 25,700 in June following a decline of 22,500 in May. Economists had anticipated only an increase of 20,500.
The UK employment rate stood at 76% in March–May 2023, up 0.20% from the December 2022–February 2023 period. The count of employees on payroll was 30 million at the end of June, down 9,000 from the previous month.
The ONS also stated that the UK’s unemployment rate inched up to 4% in May from 3.80% in the previous month. Economists did not anticipate any change in the unemployment rate. The rise in unemployment was led by individuals who remained unemployed for up to a year.
The economic inactivity fell by 0.40% to 20.80% in the three months ended May 2023 compared with the previous three months.
Compared with the previous three months, the estimated number of vacancies declined by 85,000 in the April–June 2023 period to 1,034,000.
According to the data published by the Italian National Institute of Statistics, the country’s industrial production rose by 1.60% m-o-m in May, following a decline of 2% in the previous month and a greater than 0.70% rise anticipated by economists. The reported figure reflects the first increase in five months.
The increase was led by a rebound in investment goods production of 1.40% in May, following a decline of 2.10% in April. Also, factory machinery and intermediate goods production rose by 1.20%. Consumer goods recorded an increase of 1.10%, while energy inched up 0.10%.
On a y-o-y basis, industrial production declined by 3.70% in May 2023 following a 7.40% decrease in April, reflecting the steepest contraction in three years.
The German ZEW economic sentiment index worsened to -14.70 in July from -8.50 in June and missed forecasts of -10.70. Additionally, the economic situation index for Germany also declined to -59.50 in July from -56.50 in June.
Likewise, the financial market experts’ sentiment related to the Eurozone worsened to -12.20 in July from -10 in June. Economists had anticipated a reading of -10.20. Furthermore, the situation index for the Eurozone fell to -44.40 in July from -41.90 in June.
The EUR/GBP pair is anticipated to remain range-bound in the near term due to the negative economic data coming from both the UK and Europe.
The historical price chart indicates that the EUR/GBP pair is declining after facing resistance at 0.8580. The next support is anticipated to be near 0.8410. Additionally, the currency pair is trading above its 50-day moving average while the stochastic indicator is in the bearish zone. Therefore, we anticipate the EUR/GBP pair to remain in a downtrend in the days ahead.
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.
