EUR/USD stayed on the defensive during the European session on Friday, trading below 1.0500 as investors processed recent economic data from Germany, the Eurozone, and the UK. While the economic activity in the Eurozone's private sector expanded at a moderate pace in February, it was the UK’s PMI data that drew significant attention. The Preliminary UK Services Business Activity Index rose slightly to 51.1 in February, exceeding expectations and January's figure of 50.9, offering a glimmer of positivity in an otherwise mixed economic landscape.
In contrast, the UK's Manufacturing PMI painted a less optimistic picture, declining unexpectedly to 46.4 in February from January's 48.3. This decline fell short of market expectations, which had anticipated a modest decrease to 48.4. The mixed results from the UK's PMI data limited the British Pound's upward momentum against the US Dollar, with GBP/USD struggling to gain traction and hovering near 1.2650 during the European session on Friday.
The British Pound remained weak against the US Dollar, with the data failing to meet market expectations. However, upbeat UK Retail Sales data provided some support for Pound Sterling, helping it find demand amidst the broader uncertainty. Meanwhile, investors are keenly awaiting the release of US PMIs, which could further influence market dynamics.
The potential for interest rate cuts by the Federal Reserve has piqued investor interest, with many speculating that the Fed might reduce rates more than previously anticipated, similar to the Bank of England's stance. Additionally, US repo rates have become more attractive, suggesting that bills are expected to appreciate, adding another layer of complexity to the current financial landscape.