EUR/GBP remains below 0.8450, moves little ahead of PMI data from both economies

EUR/GBP moves slowly as traders adopt caution ahead of PMI data release from the Eurozone and the UK.
The overall business activity in the Eurozone is expected to have grown at a faster pace in May than in April.
The British Pound receives support as CPI YoY rose at a robust pace of 3.5% in April, against the March reading of 2.6%.

EUR/GBP posts little losses after registering gains in the previous three consecutive days. The currency cross trades lower at around 0.8440 during Thursday’s Asian hours. The Euro (EUR) dips against its peers ahead of the HCOB Purchasing Managers Index (PMI) for the Eurozone, scheduled to be released later in the day.

According to the preliminary estimates, the Eurozone’s overall business activity is expected to have grown in May at a faster pace than what was seen in April, which may provide some support for the Euro and keep the EUR/GBP cross stable.

However, the firm dovish bets surrounding the European Central Bank’s (ECB) policy stance may continue to put downward pressure on the Euro. This sentiment strengthens as ECB officials are of the opinion that inflation is on track to return to the central bank’s target of 2%. ECB is widely anticipated to deliver a further interest rate cut in the June policy meeting.

The EUR/GBP cross also loses ground as the Pound Sterling (GBP) extended its gains following the release of the higher-than-expected United Kingdom (UK) Consumer Price Index (CPI) data for April, released on Wednesday.

The United Kingdom (UK) Office for National Statistics released Consumer Price Index (CPI) year-over-year, which rose at a robust pace of 3.5%, compared to estimates of 3.3% and the March reading of 2.6%. This is the highest level seen since November 2023. Meanwhile, the monthly headline inflation rose strongly by 1.2%, compared to estimates of 1.1% and the previous reading of 0.3%.

The surge in UK inflationary pressures could trigger the Bank of England (BoE) to further undermine an expansionary monetary policy stance. Traders will likely observe S&P Global Purchasing Managers Index (PMI) data due on Thursday.

Economic Indicator

HCOB Composite PMI

The Composite Purchasing Managers’ Index (PMI), released on a monthly basis by S&P Global and Hamburg Commercial Bank (HCOB), is a leading indicator gauging private-business activity in the Eurozone for both the manufacturing and services sectors. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the private economy is generally expanding, a bullish sign for the Euro (EUR). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for EUR.

Economic Indicator

S&P Global Composite PMI

The Composite Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging private-business activity in UK for both the manufacturing and services sectors. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation.The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the UK private economy is generally expanding, a bullish sign for the Pound Sterling (GBP). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for GBP.