- Pound (GBP) falls, extending losses from last
- BoE rate decision is due on Friday
- Euro (EUR) is rising after manufacturing activity was revised higher
- Manufacturing contracted at a slower pace
The Pound Euro (GBP/EUR) exchange rate is falling, extending losses from last week. The pair fell 0.9% in the previous session, settling on Friday at €1.1931 and trading in a range between €1.1834 and €1.2050. At 14:00 UTC, GBP/EUR trades -0.33% at €1.1892.
The pound is recovering against the U.S. dollar but continues to fall against the euro at the start of the new week, extending losses from last week when the labour government unveiled its Budget.
The pound has struggled since Labour Chancellor Rachel Reeves announced tax increases, higher borrowing, and investment. While the market has reined in BoE rate cut expectations, the pound has still fallen, suggesting that the market isn’t convinced that the budget will increase growth.
Looking ahead the Bank of England will announce its interest rate decision on Thursday at 12:00 GMT and is expected to cut rates by 25 basis points, but refrain from guiding to another rate reduction in December.
The euro is pushing higher against the pound and the US dollar, boosted by an upward revision in manufacturing PMI data.
The S&P global eurozone manufacturing PMI was upwardly revised to 46 in October, up from 45 in September and reaching a five-month high.
The data suggests that the recession in the manufacturing sector didn’t deepen further in October and production dropped at a slower pace than the previous month.
Meanwhile, German manufacturing also showed signs of improving, albeit from a weak base. The German manufacturing PMI remained well in contraction at 43, although this was up from September. The level 50 separates expansion from contraction.
The data comes after figures last week showed that Q3 GDP was stronger than expected at 0.4%, quarter on quarter, up from 0.2%. Although this stronger growth has been put down to one-offs.
Eurozone inflation was also hotter than expected at 2%, but this is still at the ECB target level.
