- Pound (GBP) falls after two days of gains
- BoE is expected to leave rates unchanged
- Euro (EUR) rises amid USD weakness
- Manufacturing PMI was 43.1 in October
The Pound Euro (GBP/EUR) exchange rate is falling after two days of gains. The pair rose +0.17% in the previous session, settling on Thursday at €1.1501 and trading in a range between €1.1477 – €1.1517. At 09:00 UTC, GBP/EUR trades -0.26% at €1.1476
The pound is falling ahead of the Bank of England’s interest rate decision, which will be announced at 12 GMT. The market expects the central bank to leave interest rates on hold for a second straight month at 5.25% after 15 straight hikes.
The move comes as the Federal Reserve and the ECB have also left interest rates on hold.
Given that no change in rates is expected, investors will be watching the central bank’s forecasts for growth and inflation. Inflation is 6.7%, among the highest inflation rates in G7 countries. However, it is slowly trending lower. Meanwhile, growth in the UK is stalling, and recent business activity data showed a third straight month of contraction, raising concerns that the UK could be heading for a recession.
Expectations are that the Bank of England’s next move will be an interest rate cut, which is expected in the second half of next year. Should the Bank of England lower its growth and inflation forecasts, investors may assume that the central bank could start cutting rates earlier, putting pressure on the pound.
The euro is advancing thanks in part to a weaker U.S. dollar and despite week manufacturing figures.
The October manufacturing PMI came in at 43.1. This was a slight upward revision from 43, the preliminary reading; however, it was still down from 43.4 in September. The level 50 separates expansion from contraction. The data points to the manufacturing sector acting as a drag on the eurozone economy at the start of the fourth quarter.
The data comes after the ECB warned over the economic outlook in the October meeting as it left interest rates on hold.
There is no further eurozone economic data due to be released today.
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