- Pound (GBP) is falling for a second day
- UK composite PMI is lowered to 50.1 in September
- Euro (EUR) rises after business activity data
- The service sector continues to shore up the Eurozone economy
The Pound-Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell 0.19% in the previous session, settling on Thursday at €1.1469. It traded between €1.1452 and €1.1496. At 09:00 UTC, GBP/EUR trades -0.09% at €1.1463. The pair is on track to gain 0.07% this week after two straight weeks of declines.
The pound is falling after a downward revision to the service sector and composite PMI figures. The UK services PMI came in at 50.8 in September, revised down from the preliminary reading of 51.9. Meanwhile, the composite PMI, a reliable gauge for business activity, was downwardly revised to 50.1 from 51 in the preliminary reading as the economy stagnated. The data comes after the manufacturing PMI fell to a 5-month low in September, with production and new orders contracting at faster rates.
The data points to a deteriorating economic picture in the UK as momentum and confidence fade ahead of the Chancellor’s November budget, where Rachel Reeves is widely expected to hike taxes to fill a £20-£30 billion black hole. Tax hikes could further slow the economy.
The EUR is holding up after data showed that it’s the service sector that is keeping the euro economy afloat. The service sector PMI for September rose to 51.3, up from 51 in August. However, this was a slight downward revision from the 51.4 preliminary reading. The level 50 separates expansion from contraction.
Delving deeper into the figures, the recovery is seen as being broadly based geographically, with growth in major economies such as Germany, Italy, and Spain. However, the situation is different in France, where political uncertainty has had a negative impact on the service sector.
The composite PMI, considered a reliable gauge of business activity, has remained in expansionary territory throughout the quarter.
Overall, the data is a positive way to end the quarter, pointing to a 0.4% quarterly growth in the eurozone economy.
