The euro remained range-bound against the pound yesterday following the release of mixed economic data from both the Eurozone and the UK. While the Eurozone flash manufacturing PMI data for January beat estimates, the flash services PMI missed the market’s expectations. Likewise, the UK’s flash services PMI data for January indicated expansion, while the flash manufacturing PMI data signaled a continuing contraction. Overall, the EUR/GBP pair rallied between 0.8533 and 0.8561 in the past 24 hours.
The S&P Global and HCOB’s (Hamburg Commercial Bank) German flash manufacturing PMI (purchasing managers’ index) improved to an 11-month high of 45.40 in January from 43.30 in December and surpassed forecasts of 43.70. A reading below 50 indicates contraction, and vice versa. Notably, the reading, reflecting a persisting contraction in the German private sector, has been below 50 since July 2022.
Also, the HCOB German flash manufacturing PMI output index hit an eight-month high of 46 in January from 43.80 in December.
However, the HCOB German flash services PMI declined to a five-month low of 47.60 in January from 49.30 in December and missed forecasts of 49.30.
Overall, the HCOB German flash composite PMI output index fell to a three-month low of 47.10 in January from 47.40 in December. The reported figure reflects the steepest pace of decline since October 2022.
At the start of the year, businesses consistently indicated a difficult demand scenario, as evidenced by a continuous decline for the ninth consecutive month in the inflow of fresh work.
The ongoing decrease in order backlogs, observed since last August, persisted into January as businesses indicated a scarcity of fresh orders to negate completed projects. Additionally, the pace of decline was the steepest in three months.
Looking forward, firms conveyed cautious optimism regarding output in the upcoming year. Business anticipations showed a positive trend for the fourth consecutive month, reaching the highest level since April 2022, albeit still sluggish when compared to historical benchmarks.
The S&P Global and HCOB (Hamburg Commercial Bank) Eurozone flash manufacturing PMI surged to a 10-month high of 46.60 in January from 44.40 in December and surpassed forecasts of 44.80.
Also, the HCOB Eurozone flash manufacturing PMI output index recorded a nine-month high of 46.60 in January from 44.40 in December.
Even though goods producers led the decline, the drop in factory production was the smallest recorded since April 2022. Similarly, fresh orders for goods posted the smallest decrease in nine months.
However, the HCOB Eurozone flash services PMI inched down to a three-month low of 48.40 in January from 48.80 in December and missed forecasts of 49.10. Notably, service activity declined for the sixth consecutive month.
Overall, the HCOB Eurozone flash composite PMI output index jumped to a six-month high of 47.90 in January from 47.60 in December. Notably, the reported decline was the smallest since last July.
However, the reading implies that the Eurozone continues to experience its most substantial contraction since 2013, excluding the initial months of the pandemic, extending into the New Year. Order backlogs decreased for the eighteenth time in the last 19 months. Looking forward, business optimism about the upcoming 12 months rose for the fourth successive month in January, hitting the highest level since May. While confidence among manufacturers hit a nine-month high, optimism among service providers reached an eight-month high.
The S&P Global UK flash manufacturing PMI increased to a nine-month high of 47.30 in January from 46.20 in December and surpassed forecasts of 46.70.
In contrast to the favorable trajectory observed in the service economy, the manufacturing sector recorded a decline for the eleventh consecutive month, registering its quickest contraction since October 2023. This downturn was led by diminished order volumes and an increase in inventory among clients. Aggregate fresh work across the private sector rose slightly in January, and the pace of growth inched up to its strongest level since May 2023.
Also, the UK flash manufacturing output index hit a three-month low of 44.90 in January from 45.50 in December.
However, the UK flash services PMI surged to an eight-month high of 53.80 in January from 53.40 in December and surpassed forecasts of 53.10. The start of the year saw a substantial rise in the activity of the service sector, contributing significantly to the augmentation of private sector output. The pace of growth was the highest in eight months.
Overall, the UK flash PMI composite output index jumped to a seven-month high of 52.50 in January from 52.10 in December. This is the third consecutive month with a reading above 50. The January flash figure also reflects the strongest pace of output growth since January 2023. Employment rose, albeit modestly, after a four-month period of job losses. Also, supplier delivery times grew for the first time since September 2022.
The mixed economic data from both the UK and the Eurozone is expected to keep the EUR/GBP pair range-bound in the near term.
The historical price chart indicates that the EUR/GBP pair is ascending after testing the support at 0.8547. The next resistance is anticipated to be only near 0.8620. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is rising towards the bullish zone. 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.
