- Construction PMI from the UK disappoints on Tuesday.
- Former Foreign Secretary Johnson calls for support for PM May’s Brexit plan.
- European officials continue to voice concerns over Italy’s budget deficit target.
After spending the Asian session in a very tight range near 0.8880, the EUR/GBP gained traction during the European trading hours and advanced to a fresh daily high above the 0.89 handle as the disappointing PMI data from the UK weighed on the GBP. Although the pair struggled to push higher above the 0.89, it remains on track to end the day in the positive territory. As of writing, the pair was trading a couple of pips below 0.89, adding 0.22% on the day.
Earlier today, the data published by the IHS Markit showed that the business activity in the construction sector expanded at a slower pace than expected with the PMI falling to 52.1 from 52.9 and missing the analysts’ estimate of 52.5. Commenting on the report, “This tale of feast and famine offers little in the way of reassurance and is more about holding on to stable growth than a sprint to the finish. The weakest overall activity in six months shows that caution and Brexit concern remain roadblocks to strong growth,” Tim Moore, Associate Director at IHS Markit, said.
Meanwhile, in a speech at Britain’s Conservative Party’s conference, former British Secretary Boris Johnson asked his supporters to back Prime Minister Theresa May’s Brexit plan to help the pound sterling to erase a small part of its daily losses. “I urge our friends in government to deliver what the people voted for, to back Theresa May in the best way possible, by softly, quietly, and sensibly backing her original plan. And in so doing to believe in conservatism and to believe in Britain,” Johnson said.
On the other hand, touching on Italy’s budget deficit target, the European Central Bank (ECB) policymaker and the head of the Bank of Finland, Olli Rehn, said that the budget deficit posed serious concerns as the central bank looked to normalise monetary policy in the coming year. Although the shared currency seems to be staying resilient vs the GBP today, Italy headlines are likely to limit the pair’s gains.
Technical levels to consider
The initial resistance for the pair could be seen at 0.8915 (Oct. 1 high) ahead of 0.8950 (50-DMA) and 0.9000 (psychological level). On the downside, supports are located at 0.8890 (100-DMA), 0.8855 (Oct. 1 low) and 0.8800 (psychological level).
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