Sterling was flat against the euro, at 83.26 pence to the common currency, a day after firming to its strongest since April 2022
Sterling dropped against a firming dollar on Tuesday as survey data confirmed a slowdown in factory activity in September, but the British currency was still near recent highs.
The pound was 0.4% lower at $1.33280 a day after closing out its strongest quarter in two years alongside a wider improvement in risk appetite. It reached a more than two-year high against the dollar just last week.
But the dollar was firmer across the board on Tuesday, after Fed Chair Jerome Powell pushed back against bets on more supersized interest rate cuts.
The centrepiece of this week for markets is the U.S. jobs due on Friday, which will offer clues about the health of the country’s economy and the trajectory of Fed policy.
The S&P Global UK Manufacturing Purchasing Managers’ Index slid to 51.5 in September, unchanged from a preliminary estimate, as British manufacturers worried about the new government’s first budget.
Sterling was flat against the euro, at 83.26 pence to the common currency, a day after firming to its strongest since April 2022.
Weighing on the euro were rising expectations of ECB policy easing in October on top of an already-priced December cut, after soft inflation figures and data showing manufacturing activity across the euro zone dropped at its fastest pace this year in September.
In contrast, stubborn British inflation has fuelled bets of slower monetary policy easing in the UK. The BoE is widely expected to reduce interest rates by 25 bps next month, but only one rate cut is fully priced in between now and the end of the year.
The pound is taking a little bit of backseat this week and riding the wave of external catalysts elsewhere, according to Michael Brown, senior research strategist at Pepperstone.
