The euro traded little changed against the British pound on Monday, following the release of mixed euro zone PMI data and amid speculation Bank of England wont raise borrowing costs for a protracted period of time.
EUR/GBP touched a session low at 0.8356 at 09:17 GMT, after which consolidation followed at 0.8361, losing 0.06% for the day. Support was likely to be found at March 21st low, 0.8344, while resistance was to be met at March 19th high, 0.8395. On March 18th, the pair touched a three-month high of 0.8400.
The market research group Markit Economics reported today that the preliminary manufacturing purchasing managers index (PMI) in the euro zone slowed down to 53.0 in March from a final value of 53.2 a month ago, which however was in line with analysts estimates. In addition, the services PMI also slowed down to 52.4 this month, but remained close to Februarys final reading of 52.6, which was the strongest since July 2011.
A separate report revealed that the German manufacturing PMI also declined to 53.8 this month from a final reading of 54.8 in February, while analysts expected a smaller decline to 54.5. Also fanning negative sentiment, a gauge of services dropped to 54.0 in March from 55.9 in the prior month. Experts have forecast a smaller decline to 55.5 this month.
However, Markit Economics reported that its French preliminary PMI rose to 51.9 this month from a final reading of 49.7 in February and compared to median analysts’ estimates of 49.7. If confirmed, this will be the fastest pace of expansion in French manufacturing activity since June 2011.
In addition, the French preliminary services PMI jumped to a two-year high of 51.4 this month from a final reading of 47.2 and compared with experts’ forecasts of an increase to 47.5.
Meanwhile, sterlings demand continued to be pressured after the minutes of Bank of Englands March meeting on policy revealed last week that policy makers voted unanimously to keep their benchmark interest rate at a record-low 0.5%. On March 19th, after BoEs minutes were released, the pound fell to a three-month low.
“If sterling is to surge, real news on interest-rate hikes is required,” said Lee McDarby, executive director of U.K. corporate foreign-exchange sales at Nomura International Plc in London, cited by Bloomberg. “The Bank of England minutes seem to have reinforced the notion that rates will remain at record lows into next year.”
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