The EURGBP pair dropped by more than 40 basis points as the market tried to understand the incoming data from the region.
Earlier today, we received upbeat manufacturing PMI data from Australia and China. We also received relatively weak manufacturing PMI data from the European Union and the UK. From Germany, the PMI dropped from the previous 45.7 to 45.4. This number was lower than the 45.5 that economists polled by Refinitiv were expecting.
The overall PMI data from the European Union dropped from 44.8 to 41.9. According to Markit, the reason for the decline was the plant closures associated with the disease. This was the fourth consecutive month that the PMI has been below 50. A reading below 50 is usually a sign that the industry is contracting. As expected, Italy saw the worst decline in the PMI while Greece was the second-worst performer. The only country that recorded a PMI above 50 was Netherlands.
Meanwhile, as I have just updated, the UK manufacturing output dropped to the lowest level in more than 8 years. Companies in the UK complained of low demand for their products as most of the country remained indoors. Also, they complained about disruptions to their supply chain, with most of them seeing delays.
Looking at the 3-hour chart, we see that the EURGBP pair has been on a downward trend after peaking at 0.9500 level on March, 19. On this chart, using the Elliot Wave formula, we see that the pair is in the third phase. The pair is also slightly below the 50% Fibonacci Retracement level. I expect the pair to continue moving lower, potentially to the 38.2% Fibonacci level at 0.8745. I also expect the pair to move upwards once it reaches this level as it attempts its fourth corrective phase.