• EUR/GBP extends losses for the third consecutive day and hits three-week lows near 0.8650.
• UK preliminary PMI shows a strong business activity in April but warns about soaring costs.
• In the Eurozone, the improvement in the manufacturing sector has been offset by a sharp contraction in the services sector

The Euro (EUR) depreciates for the third consecutive day against the British Pound (GBP) on Thursday. The pair has reached fresh three-week lows right above 0.8650 following bright preliminary business activity data in the UK, while the Eurozone’s April HCOB Purchasing Managers’ Index (PMI), released earlier on the day, failed to inspire.

UK Manufacturing activity improved to 53.6 in April from 51 in March, according to preliminary S&P Global PMI figures, against expectations of a mild contraction, at 49.9. The Services PMI rose to 52.0 from 50.5 in March, instead of stagnating at 50.0 as the market consensus had anticipated.

UK business activity remains strong, but costs soar

The UK Composite PMI has improved to 52.0 from 50.3. The survey, however, warned about the highest input costs since records started in 1984, and supply chain disruptions, in both cases due to the war in Iran, which is clouding the near-term economic outlook.

In the Eurozone, the HCOB Manufacturing PMI improved to its best reading in almost four years, at 52.2, from 51.6 in March. These figures, however, have been offset by a sharp contraction of the services sector, which dropped to 47.4 from 50.2 in the previous month, bringing the composite index down to 48.6 in April, from 50.7 in March.

April's PMI data gives further margin for the Bank of England (BoE) to keep its monetary policy unchanged in the near term, which is positive for the Pound. Data from the Eurozone, on the contrary, feeds concerns of stagflation and poses a significant challenge to the European Central Bank (ECB), which will have to fight the growing inflationary pressures without damaging fragile economic growth.