- The EUR/GBP is defending the important 200-day moving average.
- The gloomy economic outlook for the UK weakens the British pound and provides some support to the cross.
- Concerns about the energy crisis in Europe weigh on the common currency and push borders.
The EUR/GBP cross is defending the all-important 200-day simple moving average (SMA) support and appears to have halted its recent pullback from last week’s nearly one-month high. The price is moving up without a clear direction, with a slight bearish bias on Tuesday, below 0.8450.
The UK Manufacturing PMI unexpectedly fell into contraction territory for August at 46.0, a downside factor for the pound and EUR/GBP provides some support to the cross, The data adds to concerns about a deeper economic slowdown and expects a better-than-expected PMI reading of 52.5 in August. However, rising bets in favor of a 50 basis point rate hike by the Bank of England in September, coupled with a slight depreciation in the dollar from a two-decade high, helped limit the pound’s losses.
Elsewhere, the common currency is weakening on concerns about an energy crisis in the eurozone, which could drag the region’s economy into a sharp and deep recession. Indeed, European energy prices hit an all-time high after Russia announced it would cut supplies to Europe via the Nord Stream pipeline for three days at the end of the month. Bull markets are not affected by the mixed eurozone manufacturing PMI, which recovered to 49.7 in August, although it remains below 50, marking a contraction.
The fundamental picture is not entirely clear, which does not favor aggressive positions. There is no clarity even from a technical point of view. A below 0.8300 could lead to consolidation and weakness, while a weekly close above 0.8480 (20-week moving average) could give the euro support to extend gains.