- Pound (GBP) is falling for a second day
- UK GDP 0.1% MoM in August, up from -0.1%
- Euro (EUR) rises amid political stability in France
- Eurozone inflation rose to 2.2%
The Pound-Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell -0.13% in the previous session, settling on Thursday at €1.1492. It traded between €1.1487 and €1.1544. At 16:00 UTC, GBP/EUR trades -0.04% at €1.1487. The pair is on track to fall 0.09% across the week.
The pound is falling despite the UK economy returning to growth in August.
The latest data from the Office for National Statistics showed that the economy grew 0.1% month on month in August, recovering from a 0.1% contraction in July.
UK manufacturing reversed a 1.1% fall in July to grow 0.7% in August, owing to increasing output in the pharmaceutical sector. Meanwhile, the service sector, which accounts for around 80% of economic activity in the UK economy, flatlined for a second straight month, and the construction sector shrank by 0.3% in August.
The data was in line with expectations, and it keeps the UK on track to meet the international manager funds forecast on Tuesday to be the second fastest growing economy in the G7 group this year.
However, the IMF also notes that UK inflation is expected to be the stickiest in the G7 group. UK inflation data, due next week, is expected to show that consumer prices are rising towards 4%.
The EUR is rising as it continues to benefit from political stability in France, after the French Prime Minister Lecornu survived two no-confidence votes by MPs yesterday. Giving him the opportunity to pass the budget for 2026.
On the data front, eurozone inflation rose to 2.2% annually in September, in line with the preliminary reading and just above the ECB’s 2% target.
The data give the central bank little reason to cut rates further after reducing rates by two percentage points in the year to June, but it has been on hold ever since, given that inflation is roughly in line with the target.
Looking ahead to next week, attention will be on PMI activity data to provide more clarity over the health of the eurozone economy.
