Euro Surges Against the Pound Following Weak UK Manufacturing Data


EUR/USD extended its recent gains to a new two-month peak of 1.1284 and the Euro move to 0.7275 against the pound in the wake of the weaker than expected UK PMI data. Most of Europe is closed for May 1, Labor Day celebrations, although talks between Greece and its creditors will continue over the weekend, with PM Tsipras increasingly eager to reach a deal as cash runs out in Greece.

The UK April Markit PMI unexpectedly declined to 51.9 from 54.0 in March. This is the slowest rate of expansion since November. A drop in new orders received from aboard offset decent domestic demand. Sterling’s strength against the euro has been reducing competitiveness in the export sector. On the plus side, April marked the 25th consecutive month of expansion. Employment increased for a 24th straight month.

UK lending data showed a surge in unsecured consumer lending, which rose to GBP 1.2 billion in March data from the BoE, up from 0.7 billion in the previous month. This is the biggest figure since the pre-financial crisis boom days of February 2008. Recent increases in real wages and a strengthening labor market have boosted consumer confidence, which was also reflected by strength in the consumer demand component of the just-released manufacturing PMI report.

Mortgage approvals dipped slightly, to 61.3k, down from 61.5k, maintaining an overall soft underlying trend that has been seen since tighter lending criteria were introduced last year. The most encouraging part of the report is that lending to business, which has been a significant weak spot in recent years, rose to GBP 2.7 billion the biggest monthly increase since records began in mid-2011.

The EUR/GBP is pushing up against resistance at 0.7375 and a close above this level would likely lead to a test of the 0.76 area. Momentum is strong as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.

The post Euro Surges Against the Pound Following Weak UK Manufacturing Data appeared first on Forex Circles.

Source:: Euro Surges Against the Pound Following Weak UK Manufacturing Data

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