The Euro (EUR) fell to its lowest level against the British Pound (GBP) in ten days, dropping below 0.8642 on Thursday, as disappointing Eurozone preliminary HCOB Purchasing Manager’s Index (PMI) data weighed on the currency. The EUR/GBP pair's attempted recovery was capped below 0.8660, with the decline attributed to weaker-than-expected business activity data from the Eurozone, while the UK showed relative resilience amid ongoing energy shocks linked to Iran’s war [1].
Eurozone's preliminary PMIs for May revealed a sharp downturn in the services sector, which fell to a 63-month low of 46.4 from 47.6 in April, missing expectations of a rise to 47.7. Manufacturing activity also slowed, with the PMI dropping to 51.4 from 52.2, below the anticipated 51.9. The overall HCOB Composite PMI came in at 47.5, down from the previous and consensus readings of 48.8, signaling a contraction in private business activity and a bearish outlook for the Euro [1].
Country-level data showed France’s Composite PMI plunging to a 66-month low of 43.5 from 47.6, with the Manufacturing PMI at 48.9 (down from 52.8) and Services PMI at 42.9 (down from 46.5). Germany also reported negative PMI figures, with both manufacturing and services sectors contracting, further highlighting the region’s economic weakness [1].
In contrast, the UK’s May Preliminary S&P Global PMIs indicated that while the services sector slipped into contraction at 47.9 (down from 52.7 and below the expected 51.8), the Manufacturing PMI held steady at 53.7, outperforming expectations of a slowdown to 53.0. This relative strength in UK manufacturing helped support the Pound against the Euro, despite the services sector’s decline [1].
The market reaction was immediate, with the Euro testing one and a half week lows against the Pound, reflecting investor concerns over the Eurozone’s economic outlook and the comparative resilience of the UK economy in the face of external shocks [1].
CONCLUSION
Disappointing Eurozone PMI data triggered a sharp decline in the Euro against the Pound, as both services and manufacturing sectors showed contraction. The UK’s comparatively resilient manufacturing sector provided support for the Pound, intensifying the EUR/GBP slide. Market sentiment remains bearish for the Euro amid ongoing economic headwinds in the Eurozone.