The euro remained range-bound against the pound yesterday following the release of slightly weak economic data from both the UK and Europe. While the Eurozone final services PMI data for June recorded a five-month low, the UK services PMI business activity index data for the same period hit the lowest level since March. Overall, the EUR/GBP pair traded in a narrow range of between 0.8555 and 0.8576 in the past 24 hours.
According to the data published by the National Institute of Statistics and Economic Studies (INSEE), industrial production in France grew by 1.20% m-o-m in May, following an increase of 0.80% in April, which pleased economists who were expecting a 0.30% decline.
The manufacturing sector expanded 1.40% m-o-m in May, following a 0.60% rise in April. Production in the agro-food industries rebounded with an increase of 1.60% in May, following a decline of 0.50% in the previous month. The coking-refining sector posted growth of 45.10% in May, following an increase of 22.10% in April. Capital goods production rose by 1.50% in May, following similar growth in the previous month. Likewise, transport equipment recorded a rise of 1.10% in May. Production in the automotive sector surged 5.80% in May, following a decline of 1.70% in April.
In the three months to May 2023, French production grew by 2.10% compared with the comparable three months last year. As a whole, industrial production rose by 1.50%y-o-y in the three months ended May 2023.
The S&P Global German final services PMI (purchasing managers’ index) declined to 54.10 in June from the 13-month high of 57.20 in May. The flash estimates had pegged the final services PMI at 54.10. Economists did not anticipate any change in the flash estimates. The reported figure reflects the sixth successive month of an increase in service sector activities.
The reading reflected a loss of momentum for the first time since January. For the fifth consecutive month, fresh orders rose in June. However, the pace of fresh order inflow was the slowest since February. Fresh orders received from overseas customers recorded a marginal decline, putting an end to a three-month streak of growth in new export orders. The expectations of firms regarding economic activity in the upcoming 12 months recorded another decline. Following their peak in February, confidence levels have experienced a consistent decline in each subsequent month, reaching their lowest point thus far in June 2023. Nevertheless, employment continued to rise as the pace of job creation rose slightly from May, matching the 17-month high recorded in April.
The HCOB (Hamburg Commercial Bank) S&P Global Eurozone final services PMI hit a five-month low of 52 in June, down from 55.10 in May and below the flash estimate of 52.40. The economists did not anticipate any change in the flash estimate.
Also, the HCOB Eurozone composite PMI output index declined to a six-month low of 49.90 in June from 52.80 in May. A reading below 50 indicates contraction, and vice versa. Notably, in April, the Eurozone composite PMI output index hit an 11-month high of 54.10. For the first time since January, fresh orders declined slightly. Also, sales of goods manufactured in the Eurozone declined at the steepest pace in eight months.
Demand for services increased, but the pace of growth declined for the second consecutive month to a five-month low. Furthermore, the pace of increase in staffing levels was robust despite slowing down to a four-month low. Even though businesses remained positive as a whole, the degree of positive sentiment fell to its lowest level so far this year.
The S&P Global / CIPS UK Services PMI business activity index declined to 53.70 in June from 55.20 in May. The flash estimate had pegged the reading at 53.70. Economists did not anticipate any change in the flash estimate. The reported reading reflects the lowest level since March. Also, the reading represents the fifth successive month of an increase in service sector activity. Fresh orders rose slightly in June, but the pace of growth was the slowest since February.
Fresh overseas orders grew at the fastest pace in three months. The UK’s employment rose in June, reflecting the sixth successive month of increases. The pace of job creation grew at the quickest rate since September 2022.
Looking ahead, service providers maintain a positive outlook regarding their growth potential, with 48% of survey participants forecasting an increase in business activity compared with 11% projecting a contraction.
The mixed economic data from both the UK and Europe is expected to keep the EUR/GBP pair range-bound for the next few trading sessions.
The historical price chart indicates that the EUR/GBP pair is consolidating near the support level of 0.8555. The next major resistance is anticipated only near 0.8635. Additionally, the stochastic indicator is ascending toward the bullish zone. Therefore, we anticipate the currency pair to remain in an uptrend in the short term.
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