Sterling Outperforms as PMIs Push EUR/GBP to 17-Mo Lows

Key Moments

Euro Under Pressure as Sterling Rally Extends

The Euro (EUR) continued to lose ground against the British Pound (GBP) on Friday, with EUR/GBP weakening toward 0.8360. The cross remained under heavy selling pressure, leaving it on course for a decline of nearly 3% over a four-week stretch and driving it to a new 17-month low.

Stronger-than-expected UK business activity data intensified market expectations that the Bank of England (BoE) could raise interest rates in November. In contrast, recent Eurozone figures raised fresh concerns about the outlook for France, further undermining the Euro’s relative appeal.

UK Flash PMIs Signal Firm Momentum

Incoming October survey data for the United Kingdom pointed to a pickup in private-sector activity. The S&P Global Flash Purchasing Managers Index releases showed both manufacturing and services gaining traction compared with September and outperforming consensus forecasts.

The Manufacturing PMI climbed to 52.8 from 51.9, defying expectations for a modest pullback to 51.8. Services activity also strengthened, with the Services PMI rising by one full point to 53.1, against projections for a decline to 51.8.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, affirmed 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 Activity Cools Amid French Weakness

Preliminary October business surveys across the Eurozone indicated that private-sector expansion slowed, with France again slipping into contraction after posting its first increase in 10 months in September. While Germany and the broader region continued to grow, the pace of expansion moderated.

The Eurozone’s HCOB Manufacturing PMI eased to 52.4 from 52.9 in September, undershooting the 52.8 level anticipated by markets. The Services PMI fell to 51.7 from 53.0, also below the 52.8 consensus.

Mixed Signals from Germany

Within the currency bloc, German data presented a more nuanced picture. Manufacturing momentum improved, but services growth tempered.

Germany’s HCOB Manufacturing PMI advanced to 54.2 from 53.9, while Services PMI eased to 51.7 from 53.0. The divergence underscored a still-expanding but uneven growth profile in the Eurozone’s largest economy.

UK S&P Global Composite PMI – Indicator Overview

The S&P Global Composite Purchasing Managers Index (PMI) is a monthly gauge of private-sector activity in the United Kingdom, encompassing both manufacturing and services. It is based on surveys of senior executives, with each response weighted by company size and its share in sector output.

Responses capture changes versus the previous month and are closely watched for early signals on trends in Gross Domestic Product, industrial production, employment, and inflation. The index ranges from 0 to 100, with 50.0 indicating no change from the prior month. Readings above 50 point to expanding private-sector output – typically positive for Pound Sterling (GBP) – while readings below 50 indicate contraction, generally negative for GBP.

Eurozone HCOB Composite PMI – Indicator Overview

The HCOB Composite PMI, compiled monthly by S&P Global and Hamburg Commercial Bank (HCOB), tracks private-sector activity across the Eurozone’s manufacturing and services industries. Like its UK counterpart, it is derived from surveys of senior executives, with responses weighted by firm size and output contribution.

The index spans from 0 to 100. A level of 50.0 signals no change from the prior month. Readings above 50 indicate expanding private-sector activity, which is typically constructive for the Euro (EUR), while readings below 50 denote contraction, generally seen as negative for EUR.