Euro trades cautiously against British Pound ahead of EU-UK flash PMI data

• The Euro remains broadly sidelined against the British Pound in the countdown to the preliminary EU-UK PMI data.
• Eurozone’s overall business activity is expected to have contracted again.
• The UK Composite PMI is seen continuing to expand but at a moderate pace.

The Euro (EUR) trades with caution against the British Pound (GBP) around 0.8650 during the European trading session on Thursday. The cross is expected to remain broadly on the sidelines, with investors awaiting the preliminary Eurozone-United Kingdom (UK) preliminary private sector Purchasing Managers’ Index (PMI) data for May.

Eurozone’s HCOB Composite PMI is expected to have contracted again at a steady pace to 48.8. A figure below 50.0 is considered a contraction in the business activity. The Manufacturing PMI is estimated to have expanded again, but at a moderate pace to 51.9 from the previous reading of 52.2. The Services PMI is expected to have contracted again, but at a slightly moderate pace to 47.7.

Signs of further weakness in the Eurozone PMI data would diminish the appeal of the Euro. On the monetary policy front, investors await fresh cues regarding whether the European Central Bank (ECB) will make any adjustment in the interest rate policy in June amid growing inflationary pressures in the wake of elevated oil prices.

ECB policymaker and the head of Belgium's central bank, Pierre Wunsch, said on Wednesday that the central bank needs to act at some point, as “we are at the beginning of an inflation problem”.

Meanwhile, the flash UK S&P Global Composite PMI is seen arriving lower at 51.7 from 52.6 in April due to a slowdown in growth in both manufacturing and the service sector activities. The UK Service PMI is estimated to have expanded again, but at a moderate pace to 51.8 from the previous reading of 52.7.