- Pound (GBP) falls, extending losses from last week
- UK manufacturing PMI rose to 49.8, up from 46.2 in September
- Euro (EUR) is rising as manufacturing activity rises
- The manufacturing PMI rose to 50, but remains fragile
The Pound-Euro (GBP/EUR) exchange rate is falling on Monday, extending losses from last week. The pair fell -0.41% in the previous week, settling on Friday at €1.1404. It traded between €1.1338 and €1.1473. At 15:00 UTC, GBP/EUR traded -0.04% at €1.1397.
The pound is falling at the start of the new week amid a cautious mood ahead of the Bank of England interest rate decision on Thursday and despite stronger-than-expected UK manufacturing activity data. Manufacturing PMI rose to 49.7 in October, up from 46.2 in September and a modest upward revision from 49.6 in the preliminary reading.
The signs of improvement in October were driven in part by Jaguar Land Rover’s phased restart of production. Only time will tell if this is a temporary rebound or the start of a more sustained recovery.
The mood is cautious ahead of the BoE meeting on Thursday, where the central bank is expected to leave interest rates unchanged at 4%. However, the softer-than-expected inflation print and wage data could see the central bank adopt a slightly more dovish stance.
The euro is pushing higher following stronger PMI data. The eurozone manufacturing PMI rose to 50 in October, matching the preliminary estimate, and was up slightly from 49.8 in September. 50 is the level that separates expansion from contraction.
However, delving deeper into the data, the recovery is fragile, showing little momentum as new orders flatlined and headcount fell.
Export orders declined for a fourth straight month, acting as a drag on the overall demand for your paying goods and manufacturing sector employment, reaching a nearly 2 1/2 year low as companies reduce staffing levels.
Input costs were unchanged from September, although prices charged to customers increased only marginally for the first time since April.
The ECB left interest rates unchanged at 2% last week for a third straight meeting and offered no hints about future moves. The market isn’t expecting another ECB rate cut this cycle.