- Pound (GBP) is almost flat after gains yesterday
- UK business activity rises by more than expected
- Euro (EUR) is broadly flat after PMI data
- Business activity hit a 15-month high
The Pound-Euro (GBP/EUR) exchange rate is inching lower for a second straight day. The pair fell -0.22% in the previous session, settling on Wednesday at €1.1557. It traded between €1.1536 and €1.1618. At 10:15 UTC GBP/EUR trades -0.03% at €1.1553.
The pound is broadly unchanged as investors digest the latest business activity data, which showed the UK companies are having their strongest month this year amid a rebound in the dominant service sector.
According to S&P Global, the UK composite PMI, which is a good gauge for business activity, jumped to 53 in August, its highest level since last year, up from 51.5 in July. Economists had expected only a small increase to 51.6.
While the services PMI is the dominant sector in the UK, it jumped to 53.6 from July’s 51.8. The manufacturing PMI weakened to 57.3 from 58, remaining below the 50 level, which separates expansion from contraction.
The data comes after UK GDP was stronger than expected in Q2, rising 0.3% quarter on quarter.
In other news that will also be well received, the chance for Rachel Reeves, UK public sector borrowing in the financial year has so far matched forecasts, which underpin the government’s tax and spending plans. Borrowing in the April to July period totaled £60 billion, up almost £ 7 billion from a year earlier, but in line with forecasts by the OBR earlier this year.
The EUR is inching higher as eurozone business activity rises to a 15-month high. The composite PMI rose to 51.1 in August, up from 50.9 in July, marking the third straight monthly improvement and the hot reading since May 2024.
Delving deeper into the data, new orders increased for the first time in 15 months, and increased hiring added to a picture of accelerating growth. However, the outlook remains uncertain with downside risks likely to prevail.
The eurozone economy grew just 0.1% quarter on quarter in Q2, and ECB president Christine Lagarde warned that growth would likely slow in Q3 as the benefits from front-loading ahead of Trump’s tariffs fade.