- Pound (GBP) is rising after two days of losses
- The OECD forecast the UK will have the highest inflation in the G7
- Euro (EUR) falls after German business sentiment declines
- The OECD upwardly revised eurozone growth this year
The Pound-Euro (GBP/EUR) exchange rate is rising after two days of losses. The pair fell 0.02% in the previous session, settling on Tuesday at €1.1447. It traded between €1.1431 and €1.1473. At 10:00 UTC, GBP/EUR trades 0.04% at €1.1457.
The pound is inching higher today, recovering from a two-month low reached yesterday. The pound fell yesterday after data showed that UK firms lost momentum as they worried about new tax hikes. The UK composite PMI, considered a reliable gauge of business activity, fell to 51 in September from 53.5, a level that is not far from the 50 mark that separates expansion from contraction.
Meanwhile, the OECD warned that the UK will experience the highest inflation in the G7 this year, due to the impact of higher payroll taxes, an increase in the minimum wage, and rises in regulated prices. The OECD also warned that inflation is likely to remain above the BoE’s 2% target in 2026.
It also predicted stronger growth of 1.4% this year, up from 1.1% last year, making the UK the second strongest growth after the US in the G7.
The euro is slightly weaker on Wednesday after German business morale unexpectedly declined in September. The German IFO business sentiment index declined to 87.7 from 89 in August and came in below the expected 89.3. The outlook deteriorated as the prospects for economic recovery have faltered. The promises of the new government to revive the economy have been slower and less far-reaching than initially hoped for.
The German economy has struggled to regain momentum this year, contracting by 0.3% in the second quarter.
However, PMI figures yesterday were more encouraging. The composite PMI showed that business activity in Germany increased to the fastest pace in 16 months.
Meanwhile, the OECD upwardly revised its growth forecast for the eurozone region in 2025, but cautioned that momentum could fade as trade challenges persist through 2026.