Euro tests 10-day lows against British Pound after UK, Eurozone preliminary PMIs

• EUR/GBP eases to the 0.8640 area after rejection above 0.8650.
• Eurozone preliminary PMIs hint at a significant downturn in business activity in May.
• UK services activity also dropped in May, but the manufacturing sector has shown resilience.

The Euro’s (EUR) frail recovery attempt against the British Pound (GBP) has been capped below 0.8660, as the pair retreats on Thursday, testing one and a half week lows below 0.8642 at the time of writing. Eurozone preliminary HCOB Purchasing Manager’s Index (PMI) data has disappointed, while the UK’s business activity seems more resilient amid the energy shock stemming from Iran’s war.

Eurozine's preliminary PMIs for May, released earlier on Thursday, revealed that business activity in the service sector dove to a 63-month low of 46.4, from 47.6 in April, against expectations of an uptick to 47.7. Manufacturing activity slowed down to 51.4 in May, from 52.2 in April, also below the 51.9 expected.

Down to member countries, France’s Composite PMI fell to a 66-month low of 43.5, from 47.6 in April, with the Manufacturing PMI slumping to 48.9 from 52.8 in April, and Services PMI dropping to 42,9 from 46.5 in the previous month. German PMI figures were also negative, with both the manufacturing and services sectors contracting. 

In the UK, May’s Preliminary S&P Global PMIs revealed that the services sector fell to contraction levels, at 47.9, from 52.7 in April, against market expectations of a softer slowdown to 51.8. The Manufacturing PMI, on the other hand, remained unchanged from April at expectations 53.7 level, beating expecttons of a moderate slowdown, to 53.0.