- Pound (GBP) is falling for a second straight day
- UK services PMI eased to 51.9, down from 54.2
- Euro (EUR) rises after strong business activity data
- EZ service sector activity reached a 9-month high
The Pound-Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell 0.17% in the previous session, settling on Friday at €1.1452. It traded between €1.1446 and €1.1588. At 10:00 UTC, GBP/EUR trades -0.11% at €1.1440, an almost two-month low.
The pound is falling against the euro after weaker-than-expected business activity data raised concerns over the slowing UK economy, which fell sharply to 51.9 in September, down from 54.2 in August. This was well below the 53.5 level that economists forecast. The manufacturing PMI fell to 46.2, down from 47 and below expectations of 47.
As a result, the UK composite PMI, considered a reliable indicator of business activity, decreased to 51 from 53.5.
The data suggests a slowing economy at a time when inflation is elevated at 3.8%, indicating a stagflationary backdrop.
The outlook remains weak amid caution ahead of the Chancellor’s November budget, where she is widely expected to raise taxes further. Higher taxes often slow an economy. This will come at a time when the economy has stalled.
The euro is rising after eurozone PMI data came in stronger than expected, with service sector activity climbing to a nine-month high.
The eurozone services PMI climbed to 51.4 in September, up from 50.5 in August and surpassing economists’ forecast. This marked the strongest expansion in business activity so far this year, thanks to modest improvements in new orders. Employment was also stronger as the service sector extended its trend of job creation.
Input costs, while still high, moderated from August, and output charges rose at a more measured pace, suggesting some cooling of inflationary pressures.
The data comes as the ECB left interest rates unchanged for a second straight month in September. The ECB left rates unchanged as inflation remains at 2% target level and as growth remains stagnant.
