Euro slips to new 17-month lows against British Pound following Eurozone and UK PMIs

• A nearly 3% decline over a 4-week sell-off is in prospect for EUR/GBP as the pair falls further towards 0.8360.
• Strong October business activity readings in the UK PMIs offer further evidence of the economy’s resilience.
• Renewed contraction in France during October accompanies a modest slowdown in the Eurozone PMIs.

UK business activity figures have reinforced the case for a November interest rate rise by the Bank of England (BoE), while Eurozone readings have heightened concerns over France. Against that backdrop, the Euro (EUR) continues to struggle to establish a floor against a firm British Pound (GBP) on Friday. Having fallen to a fresh 17-month low close to 0.8360, EUR/GBP is heading for a nearly 3% decline across four consecutive weeks of losses.

October brought faster UK business activity growth, according to the S&P Global Flash Purchasing Managers Index. Rather than slipping to the expected 51.8, the Manufacturing PMI climbed from September’s 51.9 to 52.8. The Services PMI also defied market expectations of a fall to 51.8, advancing by one whole point to 53.1.

Assessing the outlook, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that “the promising economic picture from the latest PMIs should provide an encouraging base for further robust economic growth through the winter months, barring any adverse surprises to businesses in the tax and spending review.”

Eurozone business activity growth eases modestly

Preliminary October figures pointed to slower private sector growth across the Eurozone. France weighed on the result as activity contracted again after September’s first increase in 10 months. Germany and the rest of the region, taken as a whole, remained in expansion, albeit at a reduced pace.

At 52.4, the Eurozone’s HCOB Manufacturing PMI was down from September’s 52.9 and short of the market forecast of 52.8. The Services PMI likewise missed expectations of 52.8, falling from 53 in the previous month to 51.7. 

Germany’s readings presented a mixed picture: the HCOB Manufacturing PMI rose from September’s 53.9 to 54.2, whereas the services activity reading slipped from 53 in the preceding month to 51.7.