- Pound (GBP) falls after OECD warnings
- UK PMI data is expected to fall
- Euro (EUR) rises with ECB’s next move in focus
- PMI data is due later
The Pound Euro (GBP/EUR) exchange rate is falling, extending losses from yesterday. The pair fell –0.07% yesterday, settling at €1.1535 after trading in a range between €1.1519 – €1.1587. At 05:45 UTC, GBP/EUR trades -0.2% at €1.1510.
The pound edged lower in the previous session after the Organisation for Economic Co-operation and Development forecast that the UK economy will contract by 0.4% in the coming year and rebound by just 0.2% in 2024. The OECD’s prediction is actually an improvement to the Office of Budget Responsibility which expects the UK economy to shrink by -1.4% in 2023.
Today the focus is turning to UK PMI data, which is expected to show that business activity slowed in both the service and manufacturing sectors. The services PMI is expected to fall to 48 in November, down from 48.8 as the cost-of-living crisis sees consumers rein in their spending. Meanwhile, the manufacturing PMI is expected to fall to 45.6, down from 46.2 as new orders slow and costs rise.
In PMI data, the figure 50 separates expansion from contraction. Therefore, the data is likely to show that the UK economy is on the brink of recession.
Later in the day, the Bank of England’s chief economist, Huw Pill is due to speak and could shed some light on the BoE’s next policy steps.
The euro is rising as investors weigh up the European Central Bank’s next move. Policymakers have hinted towards the ECB slowing the rate at which it raises interest rates to 50 basis points in December. However, this wasn’t a unanimous stance, with Holzmann saying that he still supports a 75 basis point interest rate increase in December. He said that he hasn’t seen price pressures ease yet.
Looking ahead, the eurozone PMI data will be in focus, and, like the US PMIs, expectations are for a deeper contraction of business activity. The service sector is expected to fall to 48.4 from 48.6. The manufacturing PMI is forecast to rise to 46.5.