European currency markets showed resilience on Friday as upbeat Manufacturing Purchasing Managers Index (PMI) data from the Eurozone provided solid support to both the Euro and the British Pound. The EUR/GBP cross traded around 0.8570, holding flat on the day as robust industrial performance in Germany balanced mixed UK retail metrics. Concurrently, broader weakness in the US Dollar (USD), triggered by significant liquidity buyback announcements from the US Treasury Department, helped EUR/USD hold 1.1700 and GBP/USD trade higher near 1.3650, while gold held firm above $4,550 per ounce.
Eurozone and German Manufacturing Activity Surprises to the Upside
Economic activity across the Eurozone registered an unexpected improvement in August. The preliminary HCOB Eurozone Manufacturing PMI climbed to 52.8 from 51.9 in July, comfortably beating expectations of a moderate slowdown to 51.8. The Services PMI matched the previous month's level at 51.7, edging past the forecasted 51.5. Consequently, the Eurozone Composite PMI rose to 52.1, exceeding both the 51.7 market consensus and the previous month's 52.0 print.
Germany presented a split economic outlook. Germany's Manufacturing PMI surged to 54.1 in August, marking a 51-month peak, up from 52.2 in July and well above the expected 52.0. However, the German Services PMI slipped into contraction territory at 48.5 from 49.8, missing the market expectations of an expansionary 50.1. Due to the services drop, Germany’s Composite PMI eased to 51.0 from 51.3.
UK Economy: Upbeat Services Neutralise Retail Sales Drag
In the United Kingdom, resilient activity in the services sector successfully offset manufacturing moderation and weaker domestic consumption figures. The Office for National Statistics (ONS) revealed that UK Retail Sales contracted by 0.5% Month-on-Month (MoM) in July, matching consensus estimates following a revised 0.7% expansion in June.
On an annual basis, UK retail sales grew by 1.6% YoY in July, underperforming the expected 2.2% growth rate and slowing from a revised 3.8% in June. Despite the consumer spending slowdown, the positive underlying PMI data allowed the British Pound to maintain its footing against other major currencies.
EUR/GBP Technical Outlook and Key Price Levels
On the hourly timeframe, EUR/GBP trades around 0.8569, preserving a mildly constructive bias as long as it holds above key support zones. The pair remains positioned above its 100-period Simple Moving Average (SMA) at 0.8562 and its 200-period SMA at 0.8553. An upward-trending support line coming in around 0.8554 further reinforces this technical base.
The Relative Strength Index (RSI) stands at 48 points, pointing to neutral short-term momentum and indicating price consolidation rather than an aggressive directional break. Overhead resistance is capped initially at the horizontal barrier of 0.8575, followed by a heavier resistance zone at 0.8585 where recent rallies encountered selling pressure. Downside support rests at the 100-period SMA (0.8562), the horizontal floor at 0.8560, the trendline at 0.8554, and the 200-period SMA at 0.8553.
GBP/USD and EUR/USD Benefit from Broader Dollar Weakness
GBP/USD advanced toward 1.3650 during Friday's European trading session, as strong economic activity indicators overshadowed the retail slowdown. Simultaneously, EUR/USD consolidated near 1.1700 following the mixed Eurozone readings. Live market data for EUR/USD (EURUSD=X) shows the currency pair trading around 1.17 (-0.08% on the day), maintaining a 52-week trading band of 1.13 to 1.20. Technical indicators show a 14-day RSI of 71 in overbought territory and a bullish MACD histogram at 0.01 above its 0.00 signal line. Moving averages reflect an EMA20 of 1.16 and EMA50 of 1.15, with key daily pivot points at 1.17, resistance at 1.17, and support at 1.17 and 1.16.
US Treasury Liquidity Expansion and Gold Reaction
Gold held modest gains above $4,550 per ounce, staying near its highest levels since early June. Bullion continues to build momentum above its 200-day SMA as traders scale back expectations for immediate Federal Reserve rate hikes following softer inflation metrics.
The US Treasury Department altered market dynamics by announcing an expansion of its liquidity support operations on Wednesday at 12:32 GMT. Effective September 9 through November 4, maximum buybacks for 10-year to 20-year and 20-year to 30-year debt sectors will double from $2 billion to at least $4 billion per operation. This increased liquidity provision has introduced broad selling pressure on the US Dollar across foreign exchange markets.
