- Pound (GBP) fell last week after BoE paused
- UK PMI highlighted recession
- Euro (EUR) struggles as recession fears rise
- German IFO business activity data
The Pound Euro (GBP/EUR) exchange rate is rising after losses last week. The pair fell -1.15% in the previous session, settling on Friday at €1.1485 and trading in a range between €1.1485 – €1.1631. At 06:35 UTC, GBP/EUR trades +0.11% at €1.1498.
The pound tumbled across the previous week after the Bank of England unexpectedly kept interest rates on hold at 5.25%.
The surprise move from the central bank came after inflation unexpectedly fell in August and also comes on year since former Prime Minister Liz Truss drove the pound to a record low against the US donor.
While the pound has performed well across the first half of the year on soaring UK interest rates Thursday’s surprise decision from the central bank has refocused the market towards the UK’s unfavourable fundamentals.
The economic outlook remains gloomy, with fears of a recession prompting the Bank of England to pause its rate hiking cycle.
Today, there is no high-impacting UK economic data, and this week, the calendar is quiet for the UK, leaving investors to mull over last week’s central bank decision and the week’s PMI data last Friday.
UK services PMI tumbled to 47.2, down from 49.2, marking a 32-month low. Meanwhile, manufacturing also remained deep in contraction, highlighting the likelihood that the UK economy contracted in the third quarter.
The euro rose against the pound but fell against the U.S. dollar in the previous week amid ongoing concerns about the health of the eurozone economy. Data on Friday highlighted the gloomy outlook for the region. The September PMI released on Friday brought more bad news, showing that the eurozone private sector remained in contraction at the end of the third quarter due to waning demand. The manufacturing PMI fell to 43.4 whilst the services activity improved very slightly to 48.4 but remained below the 50 level, which separates expansion from contraction.
Looking ahead, German Ifo business climate data will be in focus today and is expected to deteriorate in September from 85.7 to 85.2 Weak data could raise recession fears and hurt the value of the euro.