Forexpros — The euro extended gains against the pound on Monday, advancing to a two-day high after data showed that manufacturing activity in the U.K. contracted in July for the first time in two years.
EUR/GBP hit 0.8786 during European morning trade, the pair’s highest since last Thursday; the pair subsequently consolidated at 0.8775, easing up 0.13%.
The pair was likely to find support at 0.8731, the days low and a two-week low and resistance at 0.8847, the high of July 27.
The Markit/CIPS manufacturing purchasing managers’ index fell to 49.1 in July from an upwardly revised 51.4 in June, the first time it has been below the 50-level that separates contraction from expansion since July 2009, and the weakest reading since June of that year.
Analysts had expected the PMI to decline to 51.1 last month.
The weak data underlined expectations that the Bank of England would leave interest rates on hold at their record low of 0.5% well into 2012.
The euro’s gains were limited amid lingering worries that the U.S. sovereign rating could still be downgraded, as well as concerns about the outlook for global economic growth after a report showed that Chinese factory activity slowed in July.
The euro was also higher against the U.S. dollar, with EUR/USD climbing 0.25% to hit 1.4433.
Also Monday, official data showed that the euro zone’s unemployment rate remained unchanged at 9.9% in June, holding steady for the fourth consecutive month.
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