Euro steadies against British Pound as strong PMIs offer support on both sides

• EUR/GBP trades around 0.8570 on Friday, virtually unchanged on the day.
• Eurozone manufacturing activity surprises to the upside in August, notably driven by a strong acceleration in Germany.
• In the United Kingdom, robust services activity offsets a slowdown in manufacturing, while Retail Sales decline in July.

EUR/GBP trades around 0.8570 on Friday at the time of writing, virtually unchanged on the day. The pair lacks a clear direction following the release of broadly solid activity indicators in both the Eurozone and the United Kingdom (UK), simultaneously providing support to the Euro (EUR) and the British Pound (GBP).

In the Eurozone, the preliminary HCOB Manufacturing Purchasing Managers Index (PMI) rose to 52.8 in August from 51.9 previously, while market expectations pointed to a slight slowdown to 51.8. Services activity remained unchanged at 51.7, slightly above expectations of 51.5. The Composite PMI improved to 52.1, exceeding the 51.7 forecast and the previous reading of 52.

German data, however, painted a more mixed picture. Germany’s Manufacturing PMI jumped to 54.1 in August, its highest level in 51 months, from 52.2 previously and well above the 52 expected. In contrast, the Services PMI fell to 48.5 from 49.8, while economists had expected a return to expansion territory at 50.1. Germany’s Composite PMI consequently eased to 51 from 51.3, missing expectations of 51.3.

On the UK side, preliminary S&P Global surveys also show stronger-than-expected business activity. The UK Composite PMI rose to 52.5 in August from 52.2 previously, beating expectations of 51.6. The improvement is mainly driven by the services sector, with the Services PMI accelerating to 52.8 from 52.1 and comfortably exceeding the 51.8 consensus. The Manufacturing PMI, however, slowed to 51.5 from 51.9, in line with expectations.

These encouraging activity figures help the British Pound remain resilient despite weaker consumption data. The Office for National Statistics (ONS) reported earlier that Retail Sales declined by 0.5% MoM in July, in line with expectations, following a downwardly revised 0.7% increase in June. On an annual basis, sales rose by 1.6%, below the 2.2% expected and down from a revised 3.8% previously.

The limited reaction in EUR/GBP therefore reflects supportive macroeconomic signals for both currencies. The unexpected acceleration in Eurozone manufacturing activity supports the Euro, while robust UK services activity offsets weaker consumption data and helps keep the British Pound relatively stable.

EUR/GBP technical analysis

In the one-hour chart, EUR/GBP trades at 0.8569, holding a mildly bullish near-term bias as it remains above the key underlying supports. The pair is trading over the 100-period simple moving average (SMA) at 0.8562 and the 200-period SMA at 0.8553, while an upward-sloping trend-line coming in around 0.8554 reinforces the constructive structure. The Relative Strength Index (RSI) at 48 points to neutral momentum, suggesting the cross is consolidating gains rather than extending a directional move for now.

On the topside, initial resistance emerges at the horizontal barrier near 0.8575, followed by a more important cap around 0.8585, where recent advances have stalled. On the downside, immediate support is seen near the 100-period SMA at 0.8562, just above the horizontal floor at 0.8560, while the rising trend-line around 0.8554 and the 200-period SMA at 0.8553 form a deeper support zone that would need to give way to undermine the current positive tone.

(The technical analysis of this story was written with the help of an AI tool. Know more.)