- EUR / GBP registers a modest rebound from multi-month lows and breaks a five-day losing streak.
- The British pound is affected by disappointing UK monthly retail sales data in January.
- The common currency remains stable and does not appear to be affected by the mixed euro zone PMI figures.
The crossing EUR/GBP has built on its constant positive intraday movement and has reached new daily highs, around the region of 0.8665-70, at the start of the European session on Friday.
The cross has witnessed a modest short coverage move on the last day of the week and, for now, seems to have broken five consecutive days of losing streak. The rally has helped the EUR / GBP cross to recoup a significant portion of the previous day’s losses to nine-month lows, although it lacked strong bullish conviction.
The poor performance of the British pound against its European counterpart could be attributed to the disappointing Friday release of UK monthly retail sales figures. The UK Office for National Statistics has reported that overall sales fell 8.2% in January and underlying sales (excluding auto motor fuel sales) fell 8.8% month-on-month, worse than expected.
On the other hand, the common currency has benefited from the prevailing sell bias around the US dollar and it did not appear to be affected by the mixed euro zone PMI figures for February. In fact, the preliminary version of the German manufacturing PMI rose to 60.6 in February versus estimates that pointed to a modest drop to 56.5 from 57.1 the previous month.
On the other hand, the eurozone manufacturing PMI also came in better than market expectations, although this was offset by a slight disappointment in the services PMI figures. The data, however, did little to affect the intraday bullish tone around the EUR / GBP cross, although the rally remains limited and risks fading quickly.
In addition, the data from UK PMIs have exceeded estimates, which could further limit further rise. Markit’s preliminary manufacturing PMI has risen eight tenths in February, rising to 54.9 from 54.1 points in January, improving the 54 expected, although without reaching the levels of November and December, when it reached 55.6 and 57.5 respectively. Services PMI is up more than 10 points to 49.7 from 39.5
The British pound could continue to benefit from impressive rate of vaccination against COVID-19 in the UK. This would allow Prime Minister Boris Johnson to lift the lockdown restrictions in stages and get the economy moving. Therefore, it will be prudent to wait for some continuation buying before confirming that the EUR / GBP has bottomed out in the short term.
EUR / GBP technical levels
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