A Fresh Slump as Eurzone PMI Data + Martin Weale Comments Scupper Sentiment in the GBP/EUR

Modified: Wednesday, 28 August 2013 16:00 BST
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FX Market Alerts point out an important source of pressure for the British Pound today:

"GBP weighed by Dovish comments from BoE Hawk Martin Weale - saying there could still be need for more BoE QE."

Weale is the first Monetary Policy Committee member to speak publicly since Carney announced this month that the bank would not raise interest rates while unemployment remained above 7 percent.

The comment currency markets have picked up on is:

"As far as I am concerned, asset purchases remain a tool available to the committee if it feels the economy needs further support."

Eurozone PMI gives EUR a shot in the arm, lack of UK data will weigh on Sterling

The problem for Sterling is that there remains very little economic data in August to push the currency higher. A series of strong data releases this month have supported the British Pound; now the Eurozone is producing its own positive surprises.

Bolstering the Euro across the board today is the strong PMI data coming out of the Eurozone.

The Euro-zone composite PMI index for August rose to 51.7 setting a 2-year high, consensus estimates were for a reading of 50.9.

Importantly the Manufacturing PMI released by Germany rose to 52, ahead of expectations of 51.1.

Technicals still favour the GBP

However, Luc Luyet at MIG Bank points out that the technical setup behind EUR/GBP continues to favour the GBP.

It is worth noting that this analysis was likely conducted ahead of the release of today's Eurozone PMI data; the implication being that the technical picture may be compromised.

Commenting on EUR/GBP Luyet says:

"A minor recovery could be seen, but, in the broader picture, further weakness towards the 200 day moving average is at least expected. A key resistance stands at 0.8623 (08/08/2013 high).

"Price action seen since the annual high at 0.8815 is deemed to be part and parcel of a larger corrective phase which may eventually retest under the 0.8411-0.8398 (26/04/2013 low) region."