The EUR/GBP pair rose today as the market reacted to the weak manufacturing PMI data from the UK. The pair rose because of the overall strength of the euro. The euro index, which measures the strength of the euro against a basket of currencies rose by 30 basis points.
UK manufacturing PMI disappoint
A study by Markit and Institute of Chartered Purchasing and Supply (ICPS) showed that manufacturing PMI declined to 32.6 in April. This was worse than the previously released flash PMI of 32.9. In the statement, Markit blamed the slump on the current lockdown, which has led to low demand and supply chain disruptions. The researchers found that manufacturing production, new orders, and employment declined at the fastest rate in more than 28 years.
Similarly, they found that the decline was also because of a significant reduction in stocks and a longer vendor lead time. In the statement, Rob Dobson, of IHS Markit said:
“UK manufacturing suffered its worst month in recent history in April, as output, orders books and employment all fell at rates far surpassing anything seen in the PMI survey’s 28-year history.”
In other news, the impacts of the disease were felt today when Ryanair announced that it would slash 3,000 jobs. This becomes the second-biggest airline in the UK to slash employees after British Airways said that it would slash thousands of jobs. In a statement, the company’s CEO said that he was pessimistic about the industry. He said:
“Unless we have materially lower costs for the next 12-24 months, we won’t be able to operate successfully in a market where air fares are going to be materially lower.”
EUR/GBP reacts to EU divisions
The EUR/GBP pair also reacted to divisions that have emerged in the European Union about funding for the crisis. This is after it emerged that Germany had injected 52% of the total aid that was approved by the European Commission. The main differences are that wealthier countries like Netherlands, Denmark, and Netherlands feel that the poorer countries are not doing enough. In total, the EU commission has approved more than EUR 1.9 trillion in state aid.
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EUR/GBP forecast
On the hourly chart, the EUR/GBP pair rose to an intraday high of 0.8750, which is the highest it has been since Wednesday this week. The price moved above the 38.2% Fibonacci retracement level. At the same time, the price has moved above the 100-day and 50-day EMA. I expect the pair to continue rising as bulls attempt to test the 50% retracement level at 0.8767.
On the flipside, a move below 0.8715 will invalidate this thesis. Such a move would show that there are still sellers in the market. This is an important price because it is at the 23.6% retracement level and also at the 50-day and 100-day EMA.
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