- Pound (GBP) is falling after gains last week
- UK manufacturing activity contracts for an 11th straight month
- Euro (EUR) is rising after the eurozone manufacturing activity rose
- Spain and Greece see solid growth
The Pound-Euro (GBP/EUR) exchange rate is falling after modest gains last week. The pair rose 0.1% last week, settling on Friday at €1.1556. It traded between €1.1526 and €1.1616. At 12:30 UTC on Monday, GBP/EUR trades -0.13% at €1.1541.
The pound is falling for a fourth straight day as UK manufacturers experienced a setback in August amid concerns over trade tensions abroad and tax increases at home.
The manufacturing PMI index dropped for the first time in five months, dropping to 47 from a six-month high of 48 in July. This was a downward revision from 47.3 in the preliminary reading and the 11th consecutive month that PMI manufacturing was in contractionary territory below the 50 level.
A combination of weak demand, global trade tariffs, and increased costs following April’s increase in the minimum wage and tax hike on employers, in addition to new orders shrinking at the fastest pace in four months, paints a dismal picture.
Manufacturing accounts for approximately 9% of the British economy’s output. According to the preliminary PMI reading published last month, the dominant service sector is expected to experience a certain increase in activity in August.
The EUR is pushing high at the start of the new week, boosted by an upward revision to Europe’s own manufacturing activity.
The eurozone manufacturing PMI rebounded to 50.7 in August, marking the first expansion in the sector in three years, thanks to improving domestic demand and rising new orders.
The growth is uneven, though, with Greece and Spain leading the charge due to strong domestic demand and output growth. However, Germany, the eurozone’s largest economy, narrowly missed the expansion threshold of 50 for the manufacturing PMI, which stood at 49.8 —a 38-month high.
The data suggest a resilience in industrial production despite ongoing challenges, including rising input costs.
