EUR/GBP slides toward mid-0.85s on broad euro weakness

• UK's Construction PMI drops into the contraction territory.
• Sentix Investor Confidence improves slightly in the euro area.
• This week's key event: ECB meeting on Thursday.

After losing more than 150 pips and slumping to its lowest level since May at 0.8528 last Wednesday, the EUR/GBP staged a technical correction in the second half of the week but failed to preserve its momentum on Monday. The pair, which fell to a fresh session low of 0.8558 in the last hour, was last seen trading at 0.8570, losing 0.5% on a daily basis.

The IHS Markit's latest PMI report from the UK today showed that the business activity in the construction sector contracted in the UK with the PMI reading coming in at 49.5 February to miss the market expectation of 50.3. Although this data seems to be making it difficult for the British pound to find demand, the broad euro weakness continues to weigh on the pair. On Brexit-related headlines, British Communities Secretary James Brokenshire reiterated that they were working to secure legally-binding changed to the Irish backstop.

Sentix Investor Confidence in the euro area improved to -2.2 in March from -3.7 in February but failed to help the shared currency. Other data from the eurozone revealed that the annual PPI in February stayed unchanged at 3%. The fact that the currency continues to lose strength against its major rivals despite the upbeat data suggests that investors are refraining from making large bets ahead of this Thursday's ECB announcements.

Previewing the ECB meeting, “The ECB releases the quarterly update of its macroeconomic projections. We expect a sharp downward revision to the growth forecast, with 2019 growth revised down from 1.7% to 1.3%, which would be the biggest single-meeting downgrade to growth since 2012,” noted TD Securities analysts. 

Technical levels