EUR/GBP slips below 0.8700 as soft Eurozone PMI data weighs on sentiment

• The Euro weakens for the second straight day against the British Pound, dragging EUR/GBP below the 0.8700 level.
• The final HCOB Eurozone Composite PMI for July came in at 50.9, missing expectations of 51.0 and down from 51.0 in June.
• UK PMI data beat forecasts, with the Composite PMI rising to 51.5 and the Services PMI climbing to 51.8.

The Euro (EUR) extends losses for the second consecutive day against the British Pound (GBP) on Tuesday, dragged lower by softer-than-expected Eurozone Purchasing Managers Index (PMI) data. Adding to the downside, sentiment around the Euro remains fragile in the wake of the recently announced trade framework deal between the United States(US) and European Union (EU), which is seen as more favorable to the US.

Meanwhile, the British Pound is treading carefully ahead of the Bank of England's (BoE) monetary policy decision on Thursday. However, relatively strong UK PMI data is offering some support, helping the Pound hold its ground, for now.

The EUR/GBP cross dipped below the key 0.8700 psychological level during early Asian trade and continued to slide through the European session. As of now, during early American trading hours, the cross is trying to find its footing around 0.8684, down roughly 0.30% on the day.

Eurozone PMI data released by S&P Global and Hamburg Commercial Bank (HCOB) on Tuesday came in softer than expected, adding pressure on the common currency. The HCOB Eurozone Composite PMI for July printed at 50.9, missing the forecast of 51.0 and down from the previous 51.0 reading. Similarly, the Services PMI edged lower to 51.0, falling short of the expected 51.2 and below June's 51.2 print.

In contrast, Germany showed slight improvement. The Composite PMI rose to 50.6, beating the 50.3 forecast and the previous reading. The Services PMI followed suit, climbing to 50.6 from 50.1, signaling fragile but slowly building momentum in Europe's largest economy.

Separately, the latest Eurozone Producer Price Index (PPI) data for June showed a notable rebound, offering a modest counterbalance to the weak PMI prints. Monthly PPI rose by 0.8%, in line with expectations and sharply reversing the -0.6% decline recorded in May. On a yearly basis, PPI climbed 0.6%, slightly above the 0.5% forecast and double the previous reading of 0.3%.

The latest PPI numbers show that producer costs are still rising, suggesting inflationary pressures haven't fully disappeared. However, these figures are unlikely to shift the broader outlook. The European Central Bank (ECB) held interest rates steady at its last meeting and has previously signaled that its policy easing cycle may be nearing an end. With weak PMI data and sluggish economic growth across the Eurozone, the ECB is expected to remain cautious about delivering further rate cuts too quickly, as it continues to balance persistent inflation risks with waning demand.

On the UK side, the S&P Global Composite PMI for July rose to 51.5, beating both the forecast and previous reading of 51.0. Meanwhile, the Services PMI climbed to 51.8, also topping expectations and the prior print of 51.2. The data points to modest but steady growth, supporting the Pound despite expectations that the BoE will cut interest rates by 25 basis points to 4.00%.