Pound Euro Exchange Rate News: GBP/EUR Wavered amid Troubling PMI Data

October 5, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Wavered amid Troubling PMI Data

Pound (GBP) Pressured Despite Better-than-Expected Services PMI

The Pound (GBP) failed to find much demand on Wednesday in the wake of final services PMI data. Avoiding a contraction in the services sector lent some modest support to Sterling.

A higher revised services PMI of 50 prevented a contraction in the sector that accounts for 78% of total economic output for the UK. With a preliminary reading of 49.2, the service sector looked to drop for the first time since February 2021. But, despite avoiding a contraction, a stalling of services still concerns investors. 50 is also the lowest reading in 19 months. Tim Moore, Economics Director at S&P Global Market Intelligence, said:

‘September data highlighted an absence of growth in the UK service sector for the first time in 19 months as the energy crisis continued to hit business and consumer spending.

‘Severe pressure on budgets in the wake of rising inflation, alongside deepening worries about the economic outlook, also led to a reversal in new order volumes for the first time since February 2021.’

Meanwhile, Prime Minister Liz Truss spoke at the Conservative Party conference. In an attempt to repair her waning authority, Truss is hoping to unite the divided Tory party in the wake of the market meltdown over the mini-budget. No new announcements are expected, but any further comments on fiscal policy could impact GBP investors, and the Pound.

Providing some modicum of support to Sterling is the release of the long-awaited medium-term fiscal plan. Despite Chancellor Kwasi Kwarteng and Truss both saying the report will not be ready until November, the Treasury has confirmed that the release date will be pushed forward. Economic forecasts for the UK, also set to detail the funding for the mini-budget, could calm investors’ concerns.

Euro (EUR) Muted on Downbeat PMI Data

Meanwhile, the Euro (EUR) remained under pressure on Wednesday as PMIs across the Euro area pointed to contractions in the service sector.

In Germany, Europe’s biggest economy, the service PMI was revised lower to 45, a third consecutive month of contraction. Not only the sharpest drop since May 2020, the decline in the service sector was also the fastest since the financial crisis of 2008. Inflationary pressures and bleak economic outlook were the main culprits in the fall.

Elsewhere, the Eurozone services PMI also confirmed a contraction. Slightly below the preliminary reading of 48.9, a 48.8 for September showed the sharpest decline in 18 months. Jessica Hinds of Capital Economics said of the data:

‘The final euro zone PMIs for September suggested that price pressures in the region are not yet starting to ease, even as activity appears to be in decline.

‘We think some economies, including Germany, are already contracting and expect the euro zone as a whole to fall into recession in Q4.’

GBP/EUR Exchange Rate Forecast: Domestic Woes to Weigh on Sterling?

Looking ahead, the Pound Euro exchange rate could see further movement on the back of domestic troubles in the UK. A lack of data could leave both the Pound and Euro exposed to market sentiment.


Any further negative news out of Ukraine could weigh on the Euro. The escalating geopolitical tensions between Russia and the West could weigh further on market sentiment.

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TAGS: Pound Euro Forecasts