• Weak eurozone PMIs point to further economic deterioration
• UK data roughly in line but downside risks remain
• EURGBP threatens to break above range resistance

It’s been another mixed session on Tuesday with investors potentially eyeing important events later in the week.

The PMIs across Europe earlier in the day didn’t get things off to a great start and further backed the view that the region is heading for a Recession if it isn’t already in one.

That makes the job of the ECB on Thursday that much easier as there shouldn’t be much support to keep tightening when the bloc is already cracking under the pressure. Still, the higher for longer mantra is likely to remain to ward off speculation of rate cuts early in 2024.

The UK PMIs weren’t too far from what was expected and again point to an economy that is feeling the strain and at risk of a recession.

The Labour Market figures showed the unemployment rate fell to 4.2% although those will be taken with a small pinch of salt given the new approach. But combined with other indicators on the labour market, they still point to a further easing in labour market pressure over the coming months which should weigh on wage growth and mean the BoE can continue to leave rates where they are for now.

Is EUR/GBP breaking higher?

It’s been an interesting few days for EUR/GBP, with it initially breaking above the 200/233-day simple moving average band before quickly paring gains.

EURGBP Daily

Source – OANDA on Trading View

The pair has been range-bound over the last five months and appeared to be testing the upper bound of that but it didn’t manage to build on the recent momentum.

That isn’t to say it’s not going to break higher, it could simply be consolidating around a big area of resistance, but the initial failure may be a concern.

A break above could be a big deal considering it’s been such a long period of sideways trading, with 0.89 then looking interesting having been a key area of resistance in the first four months of the year.