EUR/USD and GBP/USD Analysis: Morning PMI Gains Vulnerable to US Data

The Euro and British Pound experienced early gains following the release of October manufacturing Purchasing Managers' Index (PMI) data. However, these upside movements appear fragile, as growth was largely driven by delivery bottlenecks, rising input costs, and defensive inventory buildup rather than robust end-user demand. Market focus is expected to shift toward incoming US economic indicators, which could reignite US Dollar strength and unwind morning gains for both currency pairs.

Eurozone Manufacturing and Economic Drivers

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The Eurozone Manufacturing PMI printed at 52.7 in October, down slightly from September's 52.9 but remaining in expansion for the ninth consecutive month. Output growth slowed to a four-month low of 52.8, while export demand boosted factories in Germany and the Netherlands. Conversely, domestic demand remains soft, evidenced by contractions in France and Italy alongside a 2.0% decline in German September retail sales versus the expected 0.4% gain. Input costs continue to rise, pressuring margins as firms stockpile materials amid delivery delays.

UK Manufacturing Trends and Bank of England Outlook

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UK manufacturing activity expanded, with the October PMI rising to a five-month high of 52.8, matching preliminary estimates. Output growth hit a 25-month high, supported by a tenth consecutive month of export order growth across consumer, intermediate, and investment goods. However, cost inflation accelerated and hiring stalled following six months of growth as firms sought to offset rising expenses. These inflationary pressures suggest the Bank of England will maintain a cautious policy stance, limiting sustained upward momentum for Sterling.

US ISM Data and Catalyst Outlook

Initiative is likely to shift back to the US Dollar ahead of key data releases. The US ISM Manufacturing Index for October is forecast to rise to 54.7 from 54.5, with the prices paid index expected at 77.2 compared to 77.9 previously. An upside surprise in input prices would reinforce persistent inflation expectations, potentially prompting markets to price in a slower Fed easing cycle and supporting the Greenback. US construction spending is projected at 0.3%, down from 0.9% in the previous month.

EUR/USD Technical Outlook

From a technical standpoint, EUR/USD buyers must break and hold above resistance at 1.1230 to open the path toward 1.1260 and 1.1290. On the downside, initial key support is identified near 1.1200. A failure to hold this level could see selling pressure extend toward subsequent support levels at 1.1170 and 1.1140.

GBP/USD Technical Outlook

For GBP/USD, buyers need to clear immediate resistance at 1.3440 to target 1.3467, with further upside potential pointing to 1.3492. Conversely, if bears push prices below psychological support at 1.3400, it would disrupt the near-term bullish structure. This scenario would expose the currency pair to lower targets at 1.3380 and potentially 1.3350.

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