Eurgbp Downtrend Extends

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Eurgbp Downtrend Extends

EUR/GBP Downtrend Extends Beyond 0.87 On Weak PMI

The correction wave in the EUR/GBP has further intensified as the pair even crossed the 0.87 support level. This comes at a time when the Eurozone PMI for the month of October was way worse than the forecasts.

The HCOB and the S&P Global are responsible for maintaining and releasing the PMI for the Eurozone area. As per the data, the EU PMI (manufacturing) for October was 43, while last month's reading was around 43.4. The market players had initially forecasted a value of 43.7 for October, but the actual value had a difference of -0.7.

EU's PMI For October Drops To 47.8

Just like the manufacturing sector, the EU PMI for the services sector also dropped to 47.8 against last month's reading of 48.7. Overall, the PMI for the manufacturing & services sector suggests that the economic activity in the European Union is in decline.

According to experts, the real reason behind weak PMI data from Europe is the policies of the ECB. In a short span of time, the ECB has raised the interest rates in the region from historic lows to 4.5%. All of this was done to achieve the target of 2% inflation in the Eurozone.

According to Commerzbank, the European Central Bank is highly expected to introduce a downward revision to the EU's economic outlook. In last month's forecast, the ECB made a statement that the EU will not enter into a recession.

But if the interest rate in the European Union stays at elevated levels, the possibility of no recession will become very difficult.

For now, the EUR/GBP's weakness is mainly driven by the weak data coming from the European Union. Although the data from the UK's side is also not that great, it is still better than what we are seeing from the EU.

The EUR/GBP D1 chart shows that the 0.87500 level remains an important resistance zone. On the downside, we have the 0.86500 support zone followed by the 0.8600.

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