- Pound (GBP) is rising for a second day
- UK manufacturing PMI fell to 46.2 in September
- Euro (EUR) falls despite inflation rising
- ECB are expected to leave rates unchanged again
The Pound-Euro (GBP/EUR) exchange rate is rising for a second day. The pair rose 0.04% in the previous session, settling on Tuesday at €1.1455. It traded between €1.1433 and €1.1467. At 09:00 UTC, GBP/EUR trades 0.08% at €1.1464.
The pound is pushing higher despite UK manufacturing activity shrinking at the fastest pace in five months in September, owing to weaker domestic demand and fewer export orders.
The S&P global PMI for manufacturing fell to 46.2 last month, down from 47 in August and unchanged from the preliminary readings. The level 50 separates expansion from contraction.
Delving deeper into the figures, manufacturing orders fell for a 12th consecutive month, reflecting weak confidence and continued uncertainty over US tariffs, higher energy costs, and staffing expenses.
Businesses will be watching Chancellor Rachel Reeves’ annual budget next month after being affected by higher Social Security contributions and minimum wage increases.
Separately, data from nationwide showed that UK house prices rose slightly faster than expected in the month, increasing 0.5% in September after falling 0.1% in August.
On an annual basis, house prices rose 2.2% rising from an annual increase of 2.1% in August. This exceeded expectations by 1.8%.
Meanwhile, the euro is falling despite inflation ticking higher. The latest inflation data showed that consumer prices rose to 2.2% year-over-year in September, up from 2.0% in August.
This is the first time inflation has exceeded the ECB’s 2% target since April. The data reinforces expectations that the central bank will keep interest rates unchanged at 2% for a third consecutive meeting when it meets at the end of this month.
Last month, ECB President Christine Lagarde stated that inflation is at the desired level.
The market has scaled back expectations for further interest rate cuts after the EU struck a trade deal with the US in late July.