Euro falls to new 17-month lows against British Pound following Eurozone and UK PMI releases

• Selling pressure takes EUR/GBP towards 0.8360, putting the pair on course for a nearly 3% fall over a 4-week sell-off.
• Further signs of UK economic resilience emerge as October PMIs point to robust business activity.
• With French activity contracting again in October, Eurozone PMIs signal a modest slowdown.

Under pressure against a firm British Pound (GBP), the Euro (EUR) is still searching for a floor on Friday. UK business activity figures reinforced the case for a Bank of England (BoE) interest rate increase in November, whereas Eurozone releases deepened concerns over France. Having slipped to a new 17-month low around 0.8360, EUR/GBP is heading for a nearly 3% decline across four consecutive weeks of losses.

October brought a pickup in UK business activity, according to the S&P Global Flash Purchasing Managers Index. Against expectations of a marginal dip to 51.8, the Manufacturing PMI climbed from September's 51.9 to 52.8. The Services PMI advanced by one whole point to 53.1, defying market projections of a fall to 51.8.

Commenting on 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.”

Why is Eurozone business activity losing momentum?

France's renewed contraction weighed on Eurozone private sector growth in October, preliminary business activity figures showed. The French downturn followed September's first expansion in 10 months. Germany and the rest of the region, taken together, continued to expand, though at a reduced pace.

At 52.4, the Eurozone's HCOB Manufacturing PMI was down from 52.9 in September and short of the market's 52.8 forecast. The Services PMI also disappointed, slipping from the previous month's 53 to 51.7 against expectations of 52.8. 

A mixed picture emerged from Germany: while its HCOB Manufacturing PMI rose from September's 53.9 to 54.2, services activity slowed, with the reading falling from 53 in the preceding month to 51.7.