British Pound Dips as Eurozone Stress Boosts US Dollar

The British Pound Sterling slipped by more than 0.19% against the US Dollar at the start of the week, despite a slowdown in US services sector activity and rising US Treasury yields. The GBP/USD exchange rate stands at 1.3218 at the time of writing.

The Pound's decline was influenced by growing stress in the Eurozone, which outweighed the softer momentum in the US services sector. Market sentiment remained positive, with US equities edging higher, while the US Dollar gained traction as the Euro weakened amid France's fiscal crisis. This crisis widened the spreads between French OATs and German Bunds.

Data from the US showed that the ISM Services PMI for September fell from 55.4 to 54.9, below estimates. Input costs continued to rise, with prices paid increasing from 72.6 to 74.0, exceeding forecasts. Meanwhile, tensions in the Middle East escalated as Yemeni forces clashed with the Houthis, pushing oil prices lower. West Texas Intermediate (WTI) crude lost nearly 1%, dropping to $90.35.

In the UK, the S&P Global Services PMI rose to 52.1 from 51.7, exceeding estimates but indicating a moderate deceleration. Expectations that Prime Minister Andy Burnham plans to strengthen ties with the European Union capped the Pound's drop. Remarks by Bank of England Governor Andrew Bailey and Deputy Governor Dave Ramsden also increased the likelihood of further BoE tightening. Traders are eyeing speeches by BoE’s Catherine Mann and the release of the FOMC's last meeting minutes on October 8.